From the beginning, Bitcoin has been synonymous with privacy and anonymity because users do not need to provide any personal identifying information to send or receive this digital currency. Instead of being connected to a person, transactions are linked to unique addresses and stored in a blockchain where the building blocks are actually tamper-proof digital records. Although Bitcoin may offer a higher level of privacy protection to savvy web users, absolute anonymity is not guaranteed and transaction records are not impenetrable. In fact, more and more Bitcoin owners around the world are receiving letters from their tax authorities with not always pleasant questions.
Where do the tax authorities get the names of potential tax debtors from?
Since the blockchain is openly visible, there are analytical companies evaluating the transactions, clustering Bitcoin addresses and additionally scanning the Internet for Bitcoin addresses. If some of these coins are then exchanged for national currencies at an exchange, then tax authorities can assign all clustered addresses with a certain likelihood (usually not with certainty) to a tax subject. Therefore, it is not advisable to ignore the crypto currency tax rules of your country. The blockchain data can still be analyzed years from now.
In some countries the transfer of Bitcoins was as tax relevant as the exchange of football stickers years ago. It was only afterwards that the tax relevance of the transactions was determined. What should you do if you are no longer sure which Bitcoin addresses belong to you?
Our privacy engine can help here by searching the blockchain tree in both directions for related Bitcoin addresses after specifying known addresses.