II. Issues in Tax Enforcement Arising from Anonymity and Decentralization

1. Characteristics of Crypto Assets as “Super Tax Havens”

Marian identifies two fundamental characteristics of crypto assets that align with traditional tax havens:

・Exemption from Taxation at Source
Crypto assets are considered exempt from taxation at source because, as he explains, “there is no jurisdiction in which they operate (they are ‘held’ in cyberspace accounts known as online ‘wallets’), they are not subject to taxation at source.”1.

・Anonymity
Another defining characteristic is the anonymity of crypto assets accounts. As Marian states, “cryptocurrency accounts are anonymous. Users can start as many online ‘wallets’ as they want to buy or mine Bitcoins and trade them without ever providing any identifying information.”2.

・Decentralization
Furthermore, Marian highlights the absence of intermediary financial institutions:
“Bitcoin (and other cryptocurrencies) offer one additional major advantage to tax-evaders that traditional tax havens do not: the operation of Bitcoin is not dependent on the existence of financial intermediaries such as banks. Bitcoin is exchangeable peer-to-peer by definition. Bitcoin thus seems immune to the developing international anti-evasion regime described in Part I. In cyberspace, financial institutions-the emerging agents of tax collection-are taken out of the picture. Thus, cryptocurrencies have the potential to become super tax havens.”3.

However, in a more recent paper, Marian observes that the actual development of the crypto asset market has diverged from earlier expectations, concluding that crypto assets are not, and likely never will be, as functional as traditional tax havens4:
“[I]t has gradually become clear that cryptocurrencies do not, and probably cannot, function as tax havens any more successfully than traditional tax havens. As such, traditional tax enforcement mechanisms that rely on information reporting and tax withholding by intermediaries still work. Some legal tweaking may be required, but there is no need for fundamental changes in tax enforcement mechanisms.”

This conclusion appears to be based on the argument that, while blockchain technology theoretically has the potential to enable a system of pseudo-anonymity, decentralization, and intermediary-free financial transactions, the reality is that most of the crypto asset market is neither fully decentralized nor free from intermediaries. Moreover, it is not truly anonymous, as the transparency of blockchain technology allows for the identification of users through blockchain analysis and traditional financial intermediaries.

However, I hold a slightly different perspective.

The anonymity and decentralization of crypto assets are maintained to a certain extent due to technological advancements and the mutual reinforcement of these characteristics. Given ongoing technological progress, it cannot be ruled out that this situation may persist in the future.

Moreover, there remains a possibility that the international anti-tax evasion framework may not function effectively in certain cases. Additionally, the strengthening of regulatory measures—such as the Crypto-Asset Reporting Framework (CARF)—and enforcement mechanisms could drive taxpayers to jurisdictions beyond the reach of these regulations or toward new technologies and services designed to circumvent them.

That said, the focus of this paper is not on whether crypto assets constitute a “super tax haven”, but rather on the challenges posed by their anonymity and decentralization in tax enforcement. Accordingly, the discussion will proceed from this perspective.

2. Anonymity in Crypto Assets
Regarding the anonymity of crypto assets, it is widely recognized that they offer a certain degree of anonymity. This is because crypto assets are designed to enable transactions and ownership without requiring users to reveal their identities.


When trading crypto assets directly or seamlessly, wallets are typically used. A wallet is a tool—such as a software wallet, hardware wallet, or paper wallet—that stores private keys, signs transactions, and broadcasts them on the network.


Additionally, wallets provide an interface for accessing the blockchain, allowing users to check token balances and view transaction history.


A wallet that allows users to manage their own crypto assets without relying on third-party services for custody and protection, while also enabling them to control their private keys for signing and creating transactions, is called a private wallet (also known as a non-custodial wallet or unhosted wallet). In this article, the term “wallet” primarily refers to this type of private wallet, assuming it is provided by an overseas business and can be used without requiring user identity verification.


A “transaction” refers to an action that transfers crypto assets on the blockchain or executes smart contract operations, which will be explained later. In this article, the term “transaction” is used as a distinct concept, separate from the underlying dealings related to the transfer of crypto assets. In other words, “transaction” specifically refers to on-chain actions and is distinct from off-chain financial dealings, such as exchange trading, lending, and borrowing, which take place outside the blockchain.

When you create a wallet, a private key is randomly generated, and a corresponding public key is derived using an encryption algorithm. From this public key, an address is created—an alphanumeric string used to send and receive crypto assets and identify accounts on the blockchain.


The private key is a randomly generated alphanumeric string that allows users to manage the crypto assets associated with a specific address on the blockchain. It functions like a password.

If you lose your private key, you will no longer be able to access your crypto assets. If it is stolen, the assets stored in your wallet may be taken.


Private keys are used to sign transactions and access the crypto assets you own. They may also serve as proof that you are the legitimate holder or possessor of those assets.


On the other hand, because information encrypted with a public key can only be decrypted by someone with the corresponding private key, public keys are used to generate addresses and verify transactions.

When a user transfers crypto assets, data related to the sender’s address, the recipient’s address, and the amount of crypto assets to be sent is broadcast over the network. This broadcasted data is digitally signed with the user’s private key. Using the corresponding public key, the system verifies that the signature is from the legitimate private key holder, that there is a sufficient balance, and that the same nonce—a unique number used once per transaction—has not already been used.
These verification steps help prevent double spending and ensure that transactions are not duplicated.

Crypto assets are generally operated in a decentralized manner, and the verification process described above is performed by nodes. Nodes are the fundamental components of blockchain networks. They are devices running software that facilitates transaction sharing, data storage, and block verification. However, some nodes do not participate in block verification.


New crypto assets are issued through this verification process. Unlike traditional financial systems, crypto assets are not directly managed by a centralized authority, such as a government or financial institution that conducts identity verification. Instead, their issuance occurs automatically according to the protocol.


For this reason, crypto assets are considered decentralized. This decentralization serves as the foundation for enabling anonymous transactions and reinforces the anonymity associated with crypto assets.

On the other hand, the anonymity of crypto assets allows users to participate in the network without concerns about privacy violations or the risk of being tracked. It also reduces the likelihood of specific users being excluded from participation for any reason. This enhances the decentralization of the network, strengthening both its robustness and censorship resistance. In this way, the anonymity and decentralization of crypto assets are closely interrelated.


When generating a wallet or transferring crypto assets, users do not provide identity-related information or identification documents to the blockchain or any other system. Private keys, public keys, and addresses are also not directly linked to such information. Although crypto asset transactions are publicly recorded on the blockchain, they are associated only with a wallet address—a string of alphanumeric characters—rather than with the identity of the person executing the transaction.
For this reason, crypto assets are considered pseudonymous rather than fully anonymous.

As described above, the anonymity of crypto assets is based on several factors: users do not need to provide identity-related information when using crypto assets, such information is not connected to private keys or public keys, and user data is not recorded on the blockchain. However, this anonymity is not absolute but relative.

Users publish identifiers that are not directly linked to their identity, such as public keys and addresses. This allows third parties to trace transactions associated with specific addresses, meaning that transactions are effectively pseudonymous rather than fully anonymous. This characteristic is referred to as the pseudonymity of crypto assets.

In addition, because the information recorded on the blockchain is generally public and can be traced by anyone (traceability and transparency of crypto assets), a wallet holder’s identity may potentially be uncovered. This can occur when on-chain information is linked to off-chain information, particularly identity-related information held by centralized exchanges and merchants.


Thus, while traceability and transparency are distinct from anonymity, when combined with pseudonymity, they create the potential for breaching users’ anonymity and revealing their identities (see blockchain analysis in Section III below).

Footnotes

  1. Omri Y. Marian, Are Cryptocurrencies ‘Super’ Tax Havens?, 112 MICH. L. REV. FIRST IMPRESSIONS 38, 42 (2013). ↩︎
  2. Id. ↩︎
  3. Id. ↩︎
  4. Omri Y. Marian, Not ‘Super Tax Havens’ After All, UC IRVINE SCH. OF L. RSCH. PAPER No. 2025-01, forthcoming in INTERNATIONAL ISSUES IN THE TAXATION OF CRYPTOASSETS (Editora Revista dos Tribunais, 2025), at 7. ↩︎