Italy Uncovers €1M Tax Evasion Using Bitcoin Ordinals and BRC20 Tokens

Italian authorities say they have shut down an unusual crypto-based tax evasion operation that allegedly hid profits directly on the Bitcoin blockchain. The Economic and Financial Police Unit in Foggia reported that a suspect used the Bitcoin Ordinals protocol and the BRC20 token standard to generate and conceal roughly €1 million (about $1.1 million) in undeclared capital gains. Blockchain analytics firm Chainalysis disclosed the case in findings published Wednesday. Chainalysis said the activity combined token minting, marketplace sales and repeated inscriptions to keep funds moving onchain while sidestepping tax reporting. Investigators allege the suspect minted tokens via Ordinals and BRC20, listed them on marketplaces, and sold them at prices far above the original mint cost. Profits were then routed back to a primary Bitcoin wallet and recycled into new inscriptions, creating a loop that moved value without producing conventional tax records. Ordinals, introduced in 2023, assigns a serial number to a satoshi—Bitcoin's smallest unit—and allows arbitrary data such as images or text to be embedded in Bitcoin transactions. BRC20 is an experimental token standard built on Ordinals that enables users to deploy, mint and transfer fungible tokens on Bitcoin. While crypto-related tax evasion is not new, Chainalysis said illicit actors are increasingly leaning on NFTs, decentralized finance tools and emerging token standards to obscure wealth. Compliance research points to persistent underreporting: a March report found only 32%–56% of U.S. crypto owners report gains to tax authorities, and an August 2024 study put Norway's self-reporting rate at 12%. The U.S. Internal Revenue Service estimates the gross tax gap—taxes legally owed but not collected—at about $606 billion. Chainalysis emphasized that schemes built on technical novelty still face a core limitation: public blockchains are immutable ledgers. Transactions remain permanently recorded, and modern blockchain intelligence can reconstruct transaction networks and cross-reference them with exchange Know-Your-Customer disclosures to link funds to individuals. Investigators said the Foggia case underscores that new onchain mechanics do not guarantee anonymity. With new asset types and token standards proliferating, analysts expect regulators and tax agencies to intensify scrutiny of gaps between onchain wealth and declared income, driving more investigations globally. (Featured image: Tax Central; chart: TradingView)