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Cryptocurrency—more specifically Bitcoin—can be one of the best ways to store and hold money or wealth in a decentralised way. Useful as a backup plan, an emergency fund, a protection against seizure, or to avoid unwanted controls on your money.

But despite many assumptions, cryptocurrency is not some super-private means of keeping or holding money.

Cryptocurrency needs to be held in a digital wallet. And while wallets don’t necessarily have a name attached to them, they can be easily traceable to a person.

There are two main types of ways that cryptocurrency can be held in a wallet. These are:

• CUSTODIAL: Where cryptocurrency is held under your name, but by an exchange on your behalf. Think services like Binance, Kraken, Coinbase, and many others.
• NON-CUSTODIAL: This is where you hold your wallet yourself, maintain ownership of your own access keys on your own.

Custodial wallets are in no way private.

To hold a custodial wallet on an exchange, you must prove your identity to the exchange and submit identification. This sometimes falls under “Know Your Customer” laws (KYC), which are very common in Europe, North America, Australia, and most of the world. Crypto exchanges which provide these custodial services are mandated by governments to collect and store this information on their users, just like banks.

Even if you hold your cryptocurrency in a non-custodial wallet on your own, it’s not really private: even if your name isn’t attached to that wallet. That’s because most people first buy crypto on an exchange (therefore having to go through KYC steps), and then send it to their wallet. Therefore, leaving a paper trail that could link that wallet to themselves.

However, there is a formula you could follow if you wanted to anonymise yourself as best as possible when it comes to buying and holding cryptocurrency.

<aside> 🔐 NB: Many people believe that if you’re not doing anything wrong, or aren’t doing anything illegal with your money, you shouldn’t need to buy/store/hold crypto privately. Others disagree—even if you’re acting completely legally, that it should be a human right to hold your own money anonymously away from the prying eyes of government or anyone else. Even though governments discourage it, it isn’t actually against the law to hold crypto in an anonymous wallet in much of the world. However, when it comes to tax, you may be liable to declare the value of the crypto you hold at tax time, even if it is being held in an anonymous wallet you own. It’s important to be aware of your local laws.

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Here are some steps you could take to achieve this:

• Never buy cryptocurrency on exchanges like Binance, Coinbase, or others that require identification or KYC.
• If you have a non-custodial wallet you’ve used in the past to receive crypto from exchanges, create a new one that has never been used to receive money from exchanges.
• Do not send or receive crypto from your new non-custodial wallet to any wallet you’ve previously used in the past that could be linked to you.
• Buy cryptocurrency peer-to-peer (ie; from other users/people) instead of from exchanges. There are several services that allow you to do this, with no KYC or ID checks needed at all. These include Hodl Hodl, Bisq Network, and Robosats are examples of services that offer this kind of service.
• Have no written record on paper, computer, or elsewhere of your private keys to this wallet. Ideally, keep your seed phrases only in memory, or in another place that can’t be linked to you. For example, engraved on a titanium Billfodl and then buried or stored in a secret location.