Bitcoin, the decentralized currency that has taken the world by storm, can be difficult to understand at first. This is a complete guide walking through the process from how you buy bitcoin to how you can be anonymous when using it as a payment method.
Bitcoin marketplaces
There are a number of global actors within bitcoin, including a few Swedish ones.
The largest ones are bt.cx and Safello. It’s usually more expensive to buy bitcoin from the Swedish providers, but for Swedish customers, I still recommend them as they, being under Swedish jurisdiction, are required to follow PUL (1998:204).
Bitstamp is probably the largest one of the bitcoin markets and works great for Swedish users. Again though, for legal reasons, I still recommend Swedish users to use Swedish providers.
Bitstamp, as well as the Swedish markets, requires identity verification when buying bitcoin, meaning you might be required to provide them with a picture of your passport or ID, among other things. The grounds for having identity verification are obvious – to prevent money laundering. However, this requirement greatly affects your ability to stay anonymous online.
Information about the Swedish bitcoin marketplaces
When choosing your bitcoin marketplace, it’s important that you trust the marketplace provider as personal and sensitive information is needed. For the purposes of finding a trustworthy provider, I contacted bt.cx and Safello to ask questions about their service, as well as identity verification and security. Below you can find a compilation of their answers.
bt.cx
bt.cx is opearated by Goobit AB.
How long does the verification process usually take?
The verification should be completed within24 hours. Should that be not the case, you are encouraged to contact the support to get the process moving. The support is open 7 days a week.
What is required to become verified?
We want a picture of your passport/driver’s license or ID card (front and back).
After that, the simplest way to continue is to download an electronic ID from the Swedish tax agency. This can be done quickly if you have an electronic bank. Alternatively, you can send a copy of a letter from an administrative authority where your name, address, and date are displayed. This letter can’t be older than three months.
How do you store the information that you receive in the verification process?
We follow Swedish jurisdiction in this case (PUL) when it comes this. The information is stored offline and is always encrypted.
Which payment methods do you accept when users buy bitcoin?
We accept Swish where the maximum processing time is 6 hours during office hours. We also accept SEPA, bank giro, and bank transfers. The processing time for these methods depends on the how quickly the bank can process it.
Do you offer an online wallet, or do offers need to provide their own when buying bitcoin?
Unfortunately, we don’t offer an online wallet yet, but it’s something we are aiming for in the future.
For now, we strongly recommend blockchain.info for anyone not already using an online wallet.
Safello
Safello is operated by Safello AB.
How long does the verification process usually take?
It takes up to a day to get your account verified. If you are using mobile electronic bank ID, the process is completed within seconds.
What is required to become verified?
If you are Swedish, you can use either mobile electronic bank ID or you can upload an invoice and a picture of your passport or other legitimate identification.
How do you store the information that you receive in the verification process?
The information is stored according to applicable data protection laws. We never share any customer information to a third party. We merely use the information in order to know our customers.
- Which payment methods do you accept when users buy bitcoin?*
Swish, Handelsbanken, or bank giro.
- Do you offer an online wallet, or do offers need to provide their own when buying bitcoin?*
No
Storing bitcoin
The three most used methods for storing your bitcoin is by using an online wallet, a local wallet, or via an offline “wallet”.
The most convenient method is definitely using an online wallet, but it’s not the safest solution. An online wallet means that a company is in charge of storing your bitcoin as well as keeping it secure.
However, on several occasions, there have been reports of marketplaces being hacked and thus losing all their bitcoin. If you, regardless of this, want to use an online wallet, I recommend Blockchain.info. Blockchain.info has never been hacked and is used by millions of people around the world.
A local wallet means you are storing your bitcoin on your computer or your phone. This is separate from an “offline wallet,” which stores the bitcoin on a device without an internet connection, such as a USB memory.
Storing bitcoin on your computer - Multibit
If you are contemplating which local wallet to choose, I recommend Multibit. Multibit works on Windows Windows, OS X, and Linux/Unix.
After installing and running Multibit, you will see the following screen:
Multibit has automatically created a wallet for you. Click the Request tab you will see your new wallet.
The wallet address can be shared publically as this is the address that people sending to you will use. Thus, this is nothing you need to be afraid to share with others.
On the Send tab, you can send bitcoin to other addresses. An important note is that once bitcoin has been sent from your account, you can’t revert your transfer.
On the Transactions tab, you can see all your incoming and outgoing transactions.
It’s very important to have a password activated for your account as transactions can otherwise be sent without entering a password. You can activate a password by clicking File -> Add Password.
Then enter a strong password, preferably with more than 15 characters.
You can also use several wallets in Multibit. You can create a new wallet by clicking File -> New Wallet. Remember to have different passwords for each wallet.
Storing the wallet on a USB memory
As storing a wallet on a USB memory is fairly complex, I strongly recommend that you follow official guidelines here.
The remainder of this guide will focus on using Multibit or an online wallet.
Using bitcoin and being anonymous
Once you’ve bought some bitcoin, you might think that you are anonymous. Unfortunately, that isn’t the case; a lot of sensitive information about you has been given up just to get access to the marketplace, and each bitcoin transaction can be traced in a public ledger.
The first thing you should do to remain anonymous is to consider using an “offline wallet” or a local wallet. If you bought your bitcoin using an online wallet, it’s recommended to send it to a Multibit wallet or an offline wallet.
Every bitcoin transaction logs the IP address it was sent from. It’s thus important that you use an anonymous IP address when making a transaction.
Once your bitcoin has been transferred to your local wallet, it’s time to create a new wallet. Depending on how anonymous you wish to remain, you can either transfer the money directly to the wallet or use a “money-laundering” service.
If you send your bitcoin directly to the new wallet, you should use an IP address that is different from the one you transferred the money in the first place.
A money-laundering service works just as it sounds. It essentially mixes your bitcoin transaction with bitcoin from other users, making it impossible to track the source from which they came. There are two “money-laundering services” I can recommend: BitLaunder and Bitcoin Fog.
BitLaunder
BitLaunder charges you between 2% and 3% as a transaction fee depending on how “mixed” you want your transaction to be. Furthermore, ButLaunder doesn’t have any limits on either deposits or withdrawals, which means it’s possible to use even for small transactions.
Bitcoin Fog
Bitcoin Fog recommends their users to use Tor when visiting their website. If you are using Tor, you will have to enter the website through http://fogcore5n3ov3tui.onion/.
Bitcoin Fog charges you between 1% and 3% as a transaction fee.
In order to make a withdrawal, you need at least 0.3 bitcoins. If you have less than this, you should instead use BitLaunder.
It’s also important that you send the “laundered money“ to the new local wallet you created to make it less traceable.
Use bitcoin to pay for OVPN
If you’ve followed this guide, it’s impossible to trace you via bitcoin transactions. It’s now safe and anonymous to pay for our VPN service using bitcoin.
Paying taxes on Bitcoin
In most countries you pay taxes on cryptocurrency gains. For example, in Sweden you pay 30% capital gains tax on profits. That means if you make a profit of 1000 SEK, you pay 300 SEK in taxes. If you have made a loss then you can offset 70% of the losses against the profits. Paying for a VPN service using Bitcoin is also technically seen as a taxable event.
If you want to learn more about crypto taxes in Sweden or other countries, we recommend reading Divly’s crypto tax guides.