According to a recent report by the blockchain analytics platform Chainalysis, tax evaders have begun using Bitcoin Ordinals, BRC-20 tokens, and other emerging digital methods to conceal their wealth. Tax authorities are attempting to adapt to technological advancements and track income generated through crypto-assets. This is reported by Cointelegraph.com .
Studies show that only 32% to 56% of cryptocurrency holders in the U.S. report their gains. In Norway, this figure is even lower, standing at just 12% as of August 2024. Italy's economic and financial police recently identified an individual who concealed 1,000,000 EUR in income using Bitcoin Ordinals and the BRC-20 standard.
The Ordinals protocol, introduced on the Bitcoin network in 2023, allows for the assignment of a serial number to each satoshi (the smallest unit of Bitcoin) and the embedding of data onto it. In the Italian case, the suspect used this technology to create tokens, sell them on exchanges, and redirect the profits back into a Bitcoin wallet to invest in new assets.
According to estimates by the U.S. Internal Revenue Service (IRS), the tax gap—the amount of tax owed but not collected—totals nearly 606 billion USD. While tax evasion is typically carried out through cash payments or underreporting income, the use of cryptocurrency poses a significant risk due to the transparency of the blockchain.
Chainalysis experts emphasize that blockchain technology leaves an indelible trail, allowing any complex scheme to be exposed. Through blockchain analysis, it is possible to reconstruct financial networks and identify suspicious transactions by cross-referencing data provided by exchanges. The case in Italy has once again proven that the technical novelty of crypto-assets does not guarantee anonymity.
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