A new Chainalysis report has revealed how an Italian suspect allegedly used Bitcoin Ordinals and BRC-20 tokens to conceal more than €1 million ($1.1 million) in undeclared capital gains. Italy’s Guardia di Finanza uncovered the scheme in Foggia and Rome, tracing the activity from a seized hardware wallet.
The suspect created BRC-20 tokens—text-based inscriptions that allow token minting and transfers on Bitcoin without smart contracts—then listed and sold them for profits several times their original cost. The gains were routed back into a main Bitcoin wallet, and the process was repeated in a cycle of minting, listing, selling, and reinvesting into new inscriptions. Investigators also discovered the individual was receiving public subsidies while engaging in the scheme.
Chainalysis emphasized that “the technical novelty of crypto does not equal anonymity,” as exchange records and on-chain patterns allowed authorities to link wallet activity to a real person. The case underscores a growing concern around crypto tax reporting, with U.S. data showing the IRS captures only 32–56% of crypto owners, and a Norwegian study finding widespread noncompliance even on identity-linked exchanges.
Meanwhile, U.S. lawmakers are debating crypto tax relief. The PARITY Act proposes Treasury study and guidance on small crypto payments, while Kraken’s 56 million tax forms for 2025—mostly for sub-$50 transactions—fuel calls to raise reporting thresholds. Eighteen bipartisan House members also asked the IRS to review its 2023 staking reward guidance before 2026.
The Italian case illustrates that as Bitcoin’s ecosystem expands into tokenized assets, tax enforcement must adapt to track activity across new layers, with blockchain transparency remaining a key tool for investigators.
