Is Bitcoin really Anonymous?
Short Answer is: No, not quite. It is pseudonymous however.
Let me explain..
The best way to define Bitcoin is to visualize it as a public ledger. This ledger records every transaction that happens on the network and every transaction that will ever occur on the network. With some technical know-how, one can sit at a computer and within minutes, download the entire transaction history of Bitcoin, see every single transaction at the exact time it took place and which accounts it took place between.
This does not meet the definition of anonymous. What many people are trying to say is that Bitcoin is pseudonymous. This is because that while there is transparency on all transactions and accounts, it is not known who owns wich wallets.
From a law enforcement or government agency perspective, the fight against money laundering in cash transactions has been very difficult. There is no way to see the transactions taking place since there is no electronic record. Cash transaction happen in darkness and in secrecy. The only way law enforcement has a trail to follow is when the cash enter the traditional banking system. Once in the regulated banking system there are systems in place which require banks to obtain full information about the customer, which are known as Know Your Customer (KYC) procedures , as well as Anti-Money Laundering (AML) procedures.
Bitcoin is no different. While it is hard to track down a wallet simply from looking at it, at some point the wallet holder will likely have to convert the Bitcoins in that wallet to fiat government backed currency such as the dollar or Euro. The only way to do that is through companies which provide these services. Most companies across the world now follow the same procedures that banks follow with respect to KYC and AML, allowing law enforcement to follow the Bitcoin trail.
From a criminal perspective, Bitcoin is great if you want to hold the funds in Bitcoin forever. But it becomes possible to trace the Bitcoins once they intersect with regulated systems. This means it is likely criminals will stick with the solution that is truly anonymous, government backed paper money.