2. Set up a business which accepts Bitcoin then slowly mix the coin into your own turnover. (I am not sure about the legality of this one so maybe get legal advice.)
That would be a picture book example of money laundering so I wouldn't do that!
But yeah, cashing out slowly in small increments is probably the way to go. Even if you raise some red flags there's noting strictly illegal about owning Non-KYC coins in the EU, so while it could be a hassle it shouldn't come with legal problems (unless you try to e.g. evade taxes or launder it as per the example above).
Yeah I guess so. Although technically its his rightfully earned money and he would be paying taxes on it either way, so while it does resemble money laundering, it cannot really compare to the same kind of money laundering as with stolen money/funding illegal activities/avoiding tax responsibilities etc....
Basically OP is willing to pay taxes he/she just wants to avoid the headache of trying to prove its his money. So that is why I mentioned the business part as a possibility.
But you are completely correct. It most probably will be seen as money laundering under the law and its not something I recommend. Just an idea I had.