Italian police have cracked a tax fraud case in which a suspect used Bitcoin Ordinals and BRC-20 tokens to conceal roughly €1 million ($1.1 million) in undeclared capital gains. The investigation, announced this week, shows authorities are getting better at following the money even when it moves through newer token standards and NFT-like inscriptions.
How Ordinals and BRC-20 tokens were used
The suspect created tokens using the Bitcoin Ordinals protocol — which assigns serial numbers to individual satoshis and lets users embed data like images or text into Bitcoin transactions — and the BRC-20 token standard, which allows minting and transferring tokens directly on the Bitcoin blockchain. Those tokens were listed on marketplaces, sold at a profit, and the proceeds funneled back into a primary Bitcoin wallet. The cycle repeated, with profits moved in small steps to stay off tax records.
It's a technique that has caught the attention of tax authorities worldwide. Chainalysis has reported that bad actors increasingly lean on NFTs, decentralized finance protocols, and emerging token standards to hide wealth. But the same blockchain properties that make Bitcoin attractive for pseudonymous transactions — a permanent, immutable record — also make the fraud traceable.
Why blockchain wasn't anonymous enough
Blockchain intelligence tools can rebuild entire financial networks from transaction data and compare them with exchange disclosures. In this case, the trail of Ordinal inscriptions and BRC-20 transfers led investigators straight to the suspect. The Italian police didn't say whether the suspect has been charged, but the case is a reminder that new token standards don't offer real anonymity — just new layers to peel back.
The broader tax compliance problem is stark. A study released in March found that only 32% to 56% of US crypto owners report their gains to tax authorities. In Norway, a separate study published in August 2024 put the figure at 12%. The US Internal Revenue Service estimates the gross tax gap at roughly $606 billion.
What comes next
Italian authorities are likely to keep digging into similar patterns, especially as Ordinals and BRC-20 tokens gain more traction. The blockchain intelligence playbook — rebuilding networks, matching on-chain activity with exchange data — is becoming standard practice for tax enforcement. The question now is how many more cases like this are already sitting in the transaction logs, waiting to be connected.
