Italy Busts €1M Tax Scheme Using Bitcoin Ordinals

Italy’s Economic and Financial Police Unit in Foggia opened an investigation that found an individual creating and trading inscriptions on the Bitcoin blockchain and using those transactions to hide roughly €1 million in undeclared capital gains, according to a Chainalysis report. The probe found the suspect minted tokens, listed them on marketplaces and sold them at prices well above cost. Proceeds were converted to Bitcoin and routed to a primary wallet, and earnings were repeatedly reinvested in new inscriptions.

Ordinals, introduced in 2023, assigns a serial number to a satoshi, the smallest unit of Bitcoin, and allows data such as images or text to be embedded in Bitcoin transactions. The BRC-20 standard builds on Ordinals to let users create text-based inscriptions that can be minted into tokens and moved on the Bitcoin blockchain. Investigators found those tools were used in the Foggia case to generate apparent trading activity and capital gains that were not declared to tax authorities.

Chainalysis noted that some actors try to use new digital-asset technologies to conceal wealth. The report wrote, “Tax evasion and unreported income are age‑old financial crimes, but the methods used to commit them are rapidly evolving,” and pointed to NFTs, decentralized finance protocols and emerging token standards as means to obscure transactions.

The report highlighted a limitation for those attempting to hide funds: the public and permanent nature of blockchains. Chainalysis reported that analytics can reconstruct transaction networks and link on-chain activity to identity information that exchanges report. In the Italian case, investigators traced the flow of funds and connected sales proceeds to a main Bitcoin wallet.

The Foggia discovery comes as tax authorities update enforcement and compliance tools amid changes in crypto markets. A March study estimated that 32% to 56% of U.S. crypto owners report gains, while a Norway study put the reporting rate at about 12% in August 2024. The U.S. Internal Revenue Service estimates the gross tax gap at roughly $606 billion.

Chainalysis described the Foggia case as a reminder for law enforcement and compliance teams that new token types do not guarantee anonymity and noted blockchain intelligence has become part of investigative toolkits.