As you may have heard, the EU introduced the 5th anti-money laundering directive (5AMLD) in early 2018. As a result, localbitcoins (based in finland) is now having to enforce KYC checks.
To clarify, “a directive is a legal act of the European Union, which requires member states to achieve a particular result…”
Most people probably saw this coming but this is only half the story. There is another clause in the directive which specifically calls for the de-anonymization of users engaged with virtual currencies. This means obtaining associated wallet addresses and owner identity. Section 0.9 of the directive states:
“The anonymity of virtual currencies allows their potential misuse for criminal purposes. The inclusion of providers engaged in exchange services between virtual currencies and fiat currencies and custodian wallet providers will not entirely address the issue of anonymity attached to virtual currency transactions, as a large part of the virtual currency environment will remain anonymous because users can also transact without such providers. To combat the risks related to the anonymity, national Financial Intelligence Units (FIUs) should be able to obtain information allowing them to associate virtual currency addresses to the identity of the owner of virtual currency. In addition, the possibility to allow users to self-declare to designated authorities on a voluntary basis should be further assessed.”
By simply using virtual currencies, you can be subject to de-anonymization by the government.