Main

  • Some believe that digital assets complicate the work of tax authorities and prevent them from identifying attempts to hide income.

  • In reality, blockchain records all transactions in a detailed and transparent manner, making it poorly suited for hiding financial activity.

  • Tax authorities track, fine and prosecute individuals and businesses who attempt to use cryptocurrencies to evade taxes.

  • Binance believes that tax compliance is key to mass adoption and legitimation of the entire cryptocurrency and Web3 ecosystem.

Since blockchain is still a relatively new technology, there are many myths and misconceptions surrounding cryptocurrencies. We'll look at some of the most common beliefs about cryptocurrency that form the FUD triad (fear, uncertainty and doubt) and separate fact from fiction.


Binance is committed to increasing global awareness of blockchain and cryptocurrencies by providing educational materials about Web3 to the public. Although this area has received a lot of attention, many people have only a superficial understanding or know nothing at all about cryptocurrencies, which gives rise to many misconceptions and myths.

Some of these misconceptions are quite harmless, but others can create fear and uncertainty, as well as create unfounded preconceptions about digital assets. Therefore, Binance actively identifies and debunks the most common myths to increase cryptocurrency adoption. Of course, the crypto ecosystem is not without its flaws, so users need to do their research and think critically. However, any research should be based on an understanding of the fundamental principles, and not on myths and common misconceptions.

Myth: Cryptocurrency is used for tax evasion

The decentralized nature of cryptocurrencies means that these assets are not controlled by a centralized organization such as a government or bank. And although decentralization has its advantages, such as increased security, it has given rise to the misconception that cryptocurrencies are used for tax evasion.

All transactions using cryptocurrencies are recorded in a public register, but participants in transactions remain relatively anonymous. Some believe that it complicates the work of tax authorities and prevents them from identifying attempts to hide income. This misconception has become so popular that in 2021, the CNBC portal even published an article with the headline “Cryptocurrencies help evade taxes.”

Reality: Blockchain stores detailed data about all transactions

In reality, things are completely different. Blockchain networks are publicly accessible and viewable digital ledgers of cryptocurrency transactions. Transaction records are transparent and immutable. And traditional financial services still have tax havens created through offshore bank accounts and complex corporate structures.

Anyone can view the blockchain database at any time using the block explorer - an online tool that allows you to view all transactions ever made, the addresses associated with them and other data. The combination of computer science, economics, and forensics (sometimes called “blockchain analytics”) has resulted in an innovative investigative approach. It allows transactions to be traced to specific public, pseudonymous blockchain addresses, and then linked to the user's real identity through their IP address and exchange account.

There is a common misconception that cryptocurrencies are mainly used for tax evasion. In reality, blockchain records all transactions in a detailed and transparent manner, and is therefore not suitable for hiding financial activities from tax authorities.

Combating tax evasion

The US Internal Revenue Service (IRS) has issued guidance on the taxation of cryptocurrencies and is taking action accordingly. Other countries are also beginning to regulate cryptocurrencies and prevent illegal activities using digital assets. The resources and capabilities of tax departments may vary from country to country, but governments will be keeping a close eye on the on-chain space in the coming years. Since transaction data is stored unchanged on blockchain ledgers, tax inspectors will be able to review this information and identify any illegal or unreported transactions over the years.

The IRS Cyber ​​Crimes Unit (CCU) is a five-year-old division of the larger Criminal Investigation (CI) division that specializes in investigating cryptocurrency tax crimes. In addition, CCU is a major client of Chainalysis, one of the most prominent companies in the blockchain analytics industry. Together they track, fine and prosecute those who try to use cryptocurrencies to evade taxes.

In addition, cryptocurrency exchanges are required to promote anti-money laundering (AML) and perform Know Your Customer (KYC) verification by collecting users' personal data and reporting any suspicious activity to authorities. At the international level, reporting standards are also being developed and implemented: for example, in August 2022, the OECD approved the Crypto Assets Reporting Framework (CARF), which obliges the provision of tax information on transactions with digital assets in a standardized form.

In other words, attempts to use cryptocurrency to evade taxes are likely to be detected.

Why you need to pay taxes on cryptocurrency

The Binance team believes that paying taxes is not only required by law, but also helps the blockchain industry grow. Reporting cryptocurrency earnings increases the legitimacy of the entire ecosystem, thereby attracting more users, investors, and companies into the space.

Tax compliance is a key requirement for mass adoption and legitimation of the entire cryptocurrency and Web3 ecosystem. The myth that cryptocurrency is used for tax evasion is a hindrance to the industry, which is why it is important that users comply with tax laws to eradicate these misconceptions.

Compliance with the law also has a positive effect on the process of working with cryptocurrency, eliminating the need to worry about fines and lawsuits. Legitimacy ensures stability, innovation, growth, potentially more favorable government treatment, and fair regulation of the crypto industry.

Fact: While some may try to use cryptocurrencies to evade taxes, blockchain actually makes it easier to track and catch financial criminals.

Additional Information

  • Debunking myths about cryptocurrencies. Part 1:

  • The myth that cryptocurrencies are inherently insecure

  • Benefits of Paying Taxes on Cryptocurrency