When it comes top Crypo, people think that it is completely anonymous. But are cryptocurrency transactions on Coinbase fully anonymous?
No. Crypto traded (bought or sold) on Coinbase is required by law to be linked to your identity. On top of that, you actually have the provide a digital record of your ID (or passport) just to open up an account. This information isn’t going to be provided to just anyone and everyone. But it is attached to your crypto.
Below we get into the ins and outs of crypto anonymity, Coinbase, and a few extra tips.
Let’s jump right in!
Are Coinbase Transactions Anonymous?
Some crypto platforms off anonymity somewhat, however, Coinbase is not one of them.
One of the biggest misconceptions about bitcoin in specific is that it offers 100% anonymity.
Wasn’t Built For Anonymity
Bitcoin can help obfuscate your identity, and it does provide a lot more protection than traditional banking options, but it wasn’t built from the ground up to be a 100% anonymous way to move money.
There are a lot of software tools being built designed to help track the movement of crypto.
Identification
On top of that, of course, you have exchanges like Coinbase requiring all of their customers to provide a digital copy of their ID and to verify their identity before they are allowed to buy or sell crypto through them.
These exchanges (Coinbase included) comply with all global “Know Your Customer” rules and regulations, anti-money laundering rules and regulations, as well as other laws, rules, and restrictions designed to cut down on illicit financial activity worldwide.
You should also know that there are two “key” addresses you’ll be given when you have opened up a Coinbase account. Below we will get into both.
Public Key
Your public key sort of functions as your “email address”, acting as a public facing key that you can use to share with anyone and everyone you want to trade cryptocurrencies with.
The public-key is linked directly to your account, is 100% inseparable from your account, and cannot be deleted without deleting all of the cryptocurrency that has been sent to that address as well.
All of this crypto you accumulate through your public key is going to be tied to your real life identity via your Coinbase credentials. There’s just no getting around that.
Private Key
Your private key, on the other hand, is designed to help you send your crypto funds from the Coinbase exchange to a wallet of your choice.
Obviously, Coinbase offers their own 100% free wallet that you can use without restriction – sending your public-key funding to your private key without any difficulty whatsoever.
At the same time, though, you can send your public-key crypto to a different wallet if you’d like to. Including wallets that may not be quite as heavily linked to your identity as your Coinbase one inevitably will be.
That might be something you consider.
Benefits of a Private Key
The big benefits of having a private key is that you can decentralize your crypto holdings in a way that could have been tough to do otherwise.
With a private key you’re able to prevent Coinbase from exerting any more control over your crypto than necessary, helping your crypto remain distributed across a network of computers via the blockchain, and essentially protecting your anonymity in a way that Coinbase literally cannot (while still remaining in full legal compliance).
You definitely get a little more privacy by using a private key than you would with your public-key provided by Coinbase – but you still might have your original crypto transactions linked to your identity all the same.
Storing Your Private Key
Storing your private keys separate from your wallet (separate from your Coinbase wallet, specifically) is hugely important.
Virtual wallets – or hardware wallets – make it a lot easier to hold your private keys apart from the Coinbase environment. You’ll obviously want to pick a wallet provider that is trustworthy, secure, and reliable, though.
Be sure to do your due diligence, be sure to really research your options, and only move forward with crypto wallet operators that have near legendary reputations for security.
It’s also not a bad idea to store your private key “off-line”, either.
A lot of people refer to off-line storage as “cold storage”. Getting your private key into cold storage is a simple as copying and pasting it into a Word document and printing the document off, or even just scribbling down the private key on a Post-it note and keeping that somewhere safe and secure.
Just be sure that you don’t lose or misplace that private key.
It can (quite literally) be the key to your crypto castle!
Closing Thoughts
At the end of the day, while there are certainly some benefits from a security and privacy standpoint to using Coinbase as your exchange and wallet, your transactions here are never going to be 100% anonymous.
For starters, you can’t start your account from a place of anonymity. You’ll never gain access to all the Coinbase tools and functionality until you verify your identity.
Secondly, your public-key is (by its very nature) public and won’t just be shared with people you are transacting with. But it also live on the blockchain with all of your transactions, too.
You can get some measure of anonymity back by bringing your crypto to a wallet and using your private key. But even then you’re not going to have a fully anonymous crypto experience if you purchased your crypto through your ID verified Coinbase account.
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