Crypto Assets and Tax Audits: Are Crypto Assets the Ultimate Tax Haven?

Tax authorities around the world are stepping up efforts to track crypto asset transactions conducted by their own taxpayers. This is largely due to the challenges posed by the anonymity and decentralization inherent to crypto assets.

When using a wallet to engage in crypto asset transactions, users are not required to provide any personal identification information. Private and public keys are not linked to individuals' identities, nor is any user information recorded on the blockchain. Because of this, crypto assets are often described as having a degree of anonymity.

However, the information recorded on the blockchain is fundamentally public and traceable. Anyone can monitor transactions tied to specific addresses. In this sense, it is more accurate to say that transactions are pseudonymous rather than fully anonymous. Furthermore, when user identity data held by centralized exchanges is linked to specific wallets, it becomes possible to uncover the identity behind certain transactions—this is often referred to as "pseudo-anonymity" or "pseudonymity."