Italian authorities this week uncovered a tax evasion scheme that allegedly used Bitcoin Ordinals and the BRC-20 token standard to generate and conceal $1.1 million. The case marks one of the first times regulators have targeted the Ordinals protocol — typically associated with NFT-like inscriptions on Bitcoin — as a tool for hiding income.
How the scheme allegedly worked
According to investigators, the individual minted Ordinals inscriptions and issued BRC-20 tokens — a token standard built atop Bitcoin's Ordinals protocol — to create a paper trail that looked like legitimate crypto activity. In reality, the authorities say, the transactions were designed to obscure the source and amount of income. The $1.1 million in question was never reported to Italy's tax agency.
Bitcoin Ordinals allow users to attach arbitrary data to individual satoshis, effectively creating unique digital artifacts. BRC-20 tokens extend that concept to create fungible tokens, similar to Ethereum's ERC-20 standard. The alleged scheme exploited the novelty of both — and the relative lack of regulatory scrutiny around them until now.
The investigation and charges
The tax evasion probe was led by Italy's financial police, the Guardia di Finanza, which has been stepping up cryptocurrency-related investigations in recent months. The individual has not been named publicly, as charges have not yet been formally filed. The case is currently under review by a local prosecutor's office.
Italian law requires residents to declare any crypto holdings and income from crypto activities. Failing to do so can result in penalties ranging from fines to criminal charges. The amount allegedly hidden here — $1.1 million — puts the case squarely in felony territory.
Italy has been tightening its crypto oversight. In January, the government introduced new reporting requirements for exchanges and wallet providers. This case shows that authorities are also looking beyond traditional crypto transactions at more exotic corners of the ecosystem. Bitcoin Ordinals, which exploded in popularity in early 2023, have flown under the radar for most tax agencies. That may be changing.
The timing isn't great for Ordinals proponents. The protocol already faces criticism from Bitcoin purists who see it as spam on the network. A tax evasion case tied to Ordinals and BRC-20 could fuel calls for stricter regulation — or at least more detailed guidance from Italy's tax authority.
For now, the investigation is ongoing. The next step is likely a formal indictment, followed by a trial that could set a precedent for how Italian courts treat Ordinals-based assets. The crypto community in Italy will be watching closely.
