Tax evaders are increasingly turning to Bitcoin Ordinals, BRC-20 tokens, and related on-chain techniques to hide wealth, according to a report from blockchain analytics firm Chainalysis. The firm warns that as digital assets become more mainstream, malefactors “frequently attempt to exploit novel technologies” in the hope of evading tax authorities and law enforcement. The development comes amid a broader push by tax agencies to catch up with rapid advances in crypto and blockchain tech.

In a notable Italian case highlighted by Chainalysis, authorities allege that a suspect used Ordinals and the BRC-20 standard to conceal 1 million euros in undeclared capital gains. The investigation, led by Italy’s Economic and Financial Police Unit in Foggia, reveals how on-chain inscriptions and tokenization can be deployed to create and move assets without immediate visibility to traditional tax reporting channels. Chainalysis described the sequence as the creation of tokens via the Ordinals protocol, listing them on marketplaces, and then transferring the proceeds back to the suspect’s primary wallet in Bitcoin, with earnings continually reinvested into new inscriptions.

Ordinals, introduced in 2023, attach a serial number to a satoshi—the smallest unit of Bitcoin—and enable data such as images or text to be embedded in a transaction. The BRC-20 standard, built atop Ordinals, permits the minting and transfer of text-based inscriptions as if they were tokens on the Bitcoin network. This combination has spawned a new class of on-chain assets that can be traded or stored, complicating conventional tax reporting and oversight.

Key takeaways

• Bloomberg-backed findings: Chainalysis identifies growing use of Bitcoin Ordinals and BRC-20 inscriptions as tools for concealing wealth and evading taxes.
• Italy case mechanics: An individual allegedly leveraged Ordinals and BRC-20 to hide 1 million euros in undeclared gains, moving profits through on-chain tokens and consolidating earnings in a Bitcoin wallet before reinvestment.
• On-chain visibility remains a double-edged sword: While the technology can obscure activity, Chainalysis argues that the traceability of blockchain networks remains a fundamental enforcement advantage for investigators.
• Broader tax-gap context: Estimates suggest hundreds of billions in uncollected taxes related to crypto, with the U.S. tax gap pegged around $606 billion and varying degrees of crypto reporting across jurisdictions such as the U.S. and Norway.
• Enforcement and infrastructure: Blockchain intelligence is increasingly viewed as essential infrastructure for cross-referencing exchange data and reconstructing financial networks tied to suspected tax evaders.

Ordinals, BRC-20, and the new tax-evasion playbook

The Ordinals protocol assigns a unique serial number to satoshis, enabling on-chain data inscriptions that can be minted, transferred, and publicly stored on Bitcoin’s ledger. The accompanying BRC-20 standard expands on this by enabling token-like inscriptions with text and other data—effectively turning inscriptions into tradeable digital assets. This evolution has drawn attention from researchers and authorities as tax reporting frameworks grapple with on-chain activity that can be both legitimate and illicit in purpose.

Chainalysis notes that the Italian case illustrates how a relatively new suite of tools can be repurposed to hide gains: tokens are minted, listed on marketplaces, and proceeds routed to a central wallet, with profits continually rolled into new inscriptions. The case underscores the ongoing challenge for tax authorities: even as compliance improves, more complex on-chain structures require sophisticated tracing and data integration to ensure accurate reporting.

Enforcement leverage and the role of blockchain intelligence

It is widely acknowledged that tax authorities face substantial gaps in crypto reporting. The Internal Revenue Service estimates a sizable “tax gap”—the difference between what is legally owed and what is collected—approaching $606 billion. While traditional tax-avoidance methods often involved cash and underreporting, Chainalysis argues that the transparency of blockchains introduces a “fatal flaw” for evasion schemes: the immutable, traceable chain of transactions can, in most cases, be reconstructed and cross-referenced with data from exchanges and other on-ramps.

“The assets were sold for multiples of their original cost, and the profits were routed back to the suspect’s primary wallet in Bitcoin. The suspect continually reinvested these earnings into new inscriptions.”

Chainalysis frames the Italian case as a warning: as new digital asset classes emerge, the gap between on-chain wealth and declared tax positions is likely to become a primary target for global investigative attention. Blockchain intelligence is increasingly positioned as essential infrastructure for modern enforcement, enabling authorities to map financial networks, verify reported gains, and connect on-chain activity to real-world identities and obligations.

Beyond Italy, studies from other jurisdictions highlight varying levels of crypto tax reporting. A March report noted that only about 32% to 56% of U.S. crypto owners report their gains, while a separate August 2024 study from the National Bureau of Economic Research put Norway’s reporting rate at roughly 12%. These figures illustrate the uneven landscape of crypto taxation and the potential for on-chain activity to outpace traditional oversight tools.

In reporting on tax compliance and enforcement, Chainalysis emphasizes that while crypto can enable novel opportunities for innovation, it also creates a persistent, traceable ledger. As authorities expand their capacity to analyze inscriptions, token standards, and exchange data, the on-chain space is likely to become a more prominent battleground in the wider fight against tax evasion.

For readers monitoring the regulatory trajectory, the Italian case signals how authorities may increasingly apply blockchain analytics to standard tax investigations, not only focusing on traditional wallets and fiat conversions but also on tokenized, on-chain assets that encode data in new ways.

Information from this week’s reporting traces back to Chainalysis’s assessment and linked coverage of Italy’s investigation, and to agencies’ ongoing assessments of tax gaps and compliance challenges in crypto markets. The evolving landscape suggests that investors and users should anticipate more granular scrutiny of on-chain assets, particularly those that blend data inscriptions with token-like function.

As the market and technology mature, observers will be watching for how courts interpret on-chain inscriptions for tax purposes and how enforcement agencies adapt their audit playbooks to this rapidly changing toolkit.

Readers should stay tuned for updates as more jurisdictions publish guidance on tax treatment for Ordinals, BRC-20 tokens, and related data-embedding technologies, and as enforcement cases like Italy’s begin to shape the practical boundary between innovation and compliance.

TLDR:

• • Over $12 billion in DeFi liquidity sits dormant at any given time due to fragmented stablecoin infrastructure across chains.
  • Between 83% and 95% of deposited DeFi liquidity goes unused, mirroring the inefficiency of traditional nostro and vostro accounts.
  • USDT0 maintains one unified USDT supply across 20+ chains, removing the structural need for pre-positioned buffer capital reserves.
  • Morpho’s sUSDS/USDT0 market on Arbitrum hit 90% utilization, with $4.8M in active borrows against a $5.45M total market size.

The stablecoin market crossed $318 billion in April 2025, yet a considerable share of that capital remains unproductive.

Over $12 billion in DeFi liquidity is estimated to sit dormant at any given time. Between 83% and 95% of deposited liquidity across major protocols goes unused.

The core issue is not a lack of demand. Rather, it stems from fragmented infrastructure that forces capital to remain in reserve across multiple chains.

Pre-Positioned Reserves Drain Capital Efficiency

When stablecoin liquidity is spread across separate chains, protocols have no choice but to pre-position reserves on each one.

A market maker operating across five chains must hold buffer balances on every network. This precaution guards against demand surges that bridges cannot service quickly enough.

Corporate treasuries managing cross-border payments face the same challenge, holding redundant balances across networks to avoid settlement delays.

This pattern mirrors traditional correspondent banking. Banks worldwide hold pre-funded nostro and vostro accounts in foreign currencies across global financial networks.

Estimates of capital locked in such accounts range from $4 trillion to $27 trillion. Onchain finance has replicated this inefficiency at a smaller but rapidly growing scale.

Buffer capital does not earn yield for its owner. It does not support trading activity or settle payments faster. It exists solely as a hedge against infrastructure that cannot move value freely. This makes it a structural tax imposed by architectural limitations, not a deliberate financial decision.

USDT0 described this dynamic directly in a recent post, noting that pre-positioned funds represent capital that is “not earning yield for the individual, supporting trades, or settling payments” and instead sits in reserve against the failure mode of infrastructure that cannot move value freely enough.

USDT0 Removes the Need for Buffer Capital

USDT0 approaches this problem differently from most solutions in the market. Rather than improving how idle capital is deployed after the fact, it removes the structural condition that makes capital idle in the first place.

The protocol maintains a single unified USDT supply that moves directly across more than 20 chains without bridge dependencies or wrapped variants.

When a stablecoin can reach any chain on demand from a single pool, the case for pre-positioning capital on five separate chains collapses.

Operators no longer need to choose between capital efficiency and operational safety. One pool can serve all environments as demand shifts between them.

This effect is visible in live market data. On Morpho’s Arbitrum lending markets, borrowing demand for USDT0 has pushed the sUSDS/USDT0 market above 90% utilization.

Active borrows stand at $4.8 million against a $5.45 million market. That level of usage is only possible because USDT0 operates as a single accessible supply on Arbitrum, without a separately pre-funded reserve pool.

Justin Havins, DeFi Ecosystem Lead at Katana, captured the broader problem in an April 2026 analysis, describing today’s TVL-focused protocols as “the DeFi equivalent of a bank that takes in deposits but barely makes loans.”

His framework of revenue density — protocol revenue relative to capital deployed — offers a cleaner measure of whether liquidity is actually working. Buffer capital inflates the TVL denominator without contributing to the revenue numerator.

As institutional capital enters the space with proven efficiency frameworks, infrastructure that traps funds in idle reserves will become harder to defend.

TLDR

• Charles Hoskinson cautions that Cardano may forfeit its reputation as a research-driven blockchain.
• IOG’s research funding proposal faces rejection from Japanese delegated representatives.
• Research initiatives cover post-quantum cryptography, scalability, and blockchain security.
• The founder emphasizes that academic rigor defines Cardano’s competitive advantage.
• Decision deadline approaches June 8, intensifying ecosystem-wide tensions.

The founder of Cardano has raised alarms about the network’s research infrastructure following a controversial governance decision. Japanese delegated representatives have overwhelmingly opposed a crucial funding initiative, creating uncertainty around the future of scientific work that underpins the blockchain. Hoskinson cautioned that research facilities may shut down if adequate financial support isn’t secured.

Research Proposal Meets Strong Opposition From Japanese Delegates

Multiple Japanese delegated representatives have cast votes against Input Output Global’s funding request designed to maintain technical research operations. Current voting data reveals that 82.2% of participants reject the measure, with only 17.68% expressing support.

The funding initiative encompasses critical areas including scalability enhancements, advanced cryptographic methods, quantum-resistant security protocols, and user-focused blockchain architecture. Hoskinson cautioned that rejection could trigger an exodus of researchers from the ecosystem. He framed the situation as existential for Cardano’s positioning as an academically rigorous platform.

Debates within the community have exposed fundamental disagreements about governance philosophy versus research continuity. Some community members assert that decentralized decision-making must be respected regardless of outcomes. Conversely, the founder maintains that abandoning scientific methodology would undermine everything Cardano represents.

Founder Champions Cardano’s Research-First Philosophy

The Cardano founder has framed this funding controversy as a defining moment for the network’s core identity, which centers on academic validation and methodical development practices. The platform has built its reputation around formal verification processes and scholarly publication standards. He argues that without sustained investment in research, this distinctive positioning becomes meaningless.

Input Output Global’s comprehensive proposal, formally designated “Cardano Vision 2026: Human Centered, Scalable, Post Quantum Secure – IO Research,” addresses fundamental technological challenges. The founder contends that budget denial would create innovation bottlenecks and damage institutional credibility. He maintains that rigorous scientific methodology separates Cardano from competitors prioritizing rapid deployment over thorough validation.

The Cardano Foundation maintains its commitment to developer resources, educational outreach, and ecosystem expansion initiatives. Recent warnings indicate that treasury allocation choices have direct consequences for both laboratory operations and community participation levels. The network confronts the challenge of harmonizing decentralized governance principles with sustained scientific advancement.

Consequences for Long-Term Research Operations

The founder’s public statements underscore how Cardano’s scholarly methodology requires consistent financial backing. Research laboratories represent years of institutional development that cannot be quickly reconstructed if funding collapses. Rejection would likely disrupt active projects in advanced cryptography, performance optimization, and quantum-resistant technologies.

The voting period terminates on June 8, 2026, creating urgency for stakeholders seeking to affect the final result. Industry analysts recognize that Cardano’s commitment to academic standards elevates research funding beyond routine budget matters. The founder has repeatedly emphasized that preserving the network’s scientific credentials remains vital for international standing.

[[LINK_START_3]]Hoskinson[[LINK_END_3]] has utilized multiple communication channels to amplify these concerns, characterizing the funding debate as having ecosystem-wide ramifications. He insists that the platform’s scholarly foundation cannot be compromised. Cardano’s development philosophy deliberately prioritizes thorough validation over rapid iteration, emphasizing enduring security, environmental sustainability, and peer-validated progress.

Syndicate Labs announced it is winding down after five years of developing onchain infrastructure for customizable Ethereum rollups and sequencers, citing a shrinking market for rollups.

The company said on Thursday on X that the decision was necessary because “the rollup market has fundamentally shifted.”

“Unfortunately, the rollup market has shrunk dramatically. For every new rollup spinning up, several more are quietly shutting down,” it said. 

Syndicate Labs is a venture capital-backed company that focuses on enabling customizable, programmable Ethereum appchains, or application-specific rollups, with smart sequencers. It raised $20 million in Series A funding led by Andreessen Horowitz in 2021. 

The Ethereum scaling ecosystem is dominated primarily by three players — Arbitrum One, Base and OP Mainnet — which command a 75% market share. Smaller players are slowly getting squeezed out as activity and capital concentrate among the top three.

Additionally, the total value secured across the layer-2 rollup ecosystem has declined by about 36% since its peak of just over $50 billion in October, with smaller networks losing much more as capital migrated to the industry leaders, according to L2Beat. 

“L2 activity has dropped 61% since June, leaving many smaller networks as ‘zombie chains’ with minimal usage,” reported 21Shares in December. 

Three players account for nearly $30 billion in rollup total value secured. Source: L2Beat 

Rollup market has shifted

Syndicate said the market has shifted away from its technology, “making it impossible to wait out these market conditions.”

“Instead, custom chains are being built by consulting teams from scratch, with very little reusable tech or network value.”

Related: Legend becomes latest DeFi app to throw in towel

The company said the Syndicate Network Collective is independent of Syndicate Labs, so SYND token governance is not immediately affected. It also said the decision to wind down was not influenced by the recent bridge compromise. 

The Syndicate Commons Bridge on Base was exploited in late April because of a security breach and a leaked private key, resulting in the loss of 18.5 million SYND tokens worth about $330,000 at the time. 

SYND fell 44% after the hack and declined another 21% over the past three hours, hitting an all-time low of $0.012 after the closure announcement, according to CoinGecko. The token is down 99.5% from its September 2025 peak of $2.61. 

A year of DeFi and crypto closures 

Syndicate Labs is the latest addition to a growing list of crypto and DeFi closures this year. 

DeFi mobile superapp Legend announced it was winding down on May 13, citing growth and scaling problems. 

Other recent closures include Solana DeFi aggregator Step Finance, DeFi derivatives protocol Polynomial, Balancer Labs, the team behind the DeFi protocol Balancer, and Seamless Protocol, a DeFi lending protocol on Base.

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A massive XRP derivatives play is betting that its price goes nowhere until the end of June, even as macro headwinds and regulatory developments suggest a volatility boom.

The move hit the tape on crypto exchange Deribit as a single-block trade, meaning it was a large transaction executed over-the-counter in a privately negotiated deal to prevent it drastically moving the price.

The trade likely involved a whale or an institution executing what is known as the “short straddle” strategy by shorting (selling) 1.5 million contracts of both the $1.40 call and put options expiring on June. 26.

By selling both the call and put, the trader is effectively providing insurance against sharp price movements away from the $1.40 strike. The trader received an upfront premium of $224,500 for assuming this volatility risk.

The trader will retain that amount as profit if XRP remains near $1.40 through June 26.

Hence, the bet is essentially on volatility to stay low, with prices pinned near $1.40. The payments-focused cryptocurrency has largely traded between $1.30 and $1.50 since February, according to CoinDesk data.

The strategy is not without risk. A sharp move in either direction would turn the position unprofitable, requiring the trader to cover losses owed to option buyers.

As of now, plenty of factors point to potential for volatility. Inflation concerns in the U.S. and other parts of the world are pushing up government bond yields worldwide, disincentivizing investments in stocks, cryptocurrencies and other risky assets.

Meanwhile, the Senate Banking Committee advanced the Clarity Act, a landmark U.S. legislative proposal designed to establish a clear regulatory framework for cryptocurrencies and digital assets. The bill now moves forward to a full Senate vote.

Stuart Alderoty, chief legal officer at Ripple, which uses XRP to facilitate cross-border transactions, reportedly called the banking committee’s decision a “monumental outcome” and cited the protection of 67 million American crypto holders as the bill’s purpose.

XRP is often seen as a U.S. crypto play, as Ripple is based in San Francisco and is among several firms that have received conditional approval from the Office of the Comptroller of the Currency (OCC) to establish the Ripple National Trust Bank (RNTB).

Tax dodgers have started turning to Bitcoin Ordinals, BRC-20 tokens and other digital methods in an attempt to hide their wealth from tax authorities, according to blockchain analytics platform Chainalysis.

“Tax evasion and unreported income are age-old financial crimes, but the methods used to commit them are rapidly evolving,” Chainalysis said in a report Wednesday.

“As digital assets become more mainstream, bad actors frequently attempt to exploit novel technologies — such as NFTs, decentralized finance protocols, or emerging token standards — in hopes of keeping their wealth hidden from tax authorities and law enforcement.”

Tax authorities have been scrambling to catch up with technological advances and to track and apply taxes. A March study estimated that only 32% to 56% of US crypto owners report their gains. In Norway, that percentage was only 12%, according to a study from August 2024. 

Source: Chainalysis

Italian authorities uncover $1 million tax evasion scheme

Chainalysis reported that Italy’s Economic and Financial Police Unit in Foggia reportedly uncovered a tax evasion scheme in which an individual allegedly used Bitcoin Ordinals and the BRC-20 token standard to hide 1 million euros ($1.1 million) in undeclared capital gains.

Introduced in 2023, the Ordinals protocol assigns a serial number to a satoshi, the smallest unit of Bitcoin, and allows data, such as images or text, to be embedded in a Bitcoin transaction. The BRC-20 standard, built on top of it, allows text inscriptions to be deployed, minted into tokens and transferred on the Bitcoin blockchain.

Italian authorities discovered during their investigation that the suspect was using the Ordinals protocol and the BRC-20 standard to create tokens, then sent them and listed them on marketplaces, according to Chainalysis.

“The assets were sold for multiples of their original cost, and the profits were routed back to the suspect’s primary wallet in Bitcoin,” Chainalysis said. “The suspect continually reinvested these earnings into new inscriptions.”

Blockchain intelligence essential infrastructure

The US Internal Revenue Service estimates that the gross tax gap, the government’s best estimate of the total tax it is legally owed but did not receive, is about $606 billion. Tax evasion tactics usually include paying in cash and underreporting income.

However, Chainalysis said using crypto for tax evasion comes with a “fatal flaw” because of the “inherent transparency of the blockchain. No matter how sophisticated a scheme appears, the underlying technology leaves a permanent immutable trail.”

Blockchain intelligence can reconstruct a financial network and cross-reference it with data that crypto exchanges are required to report to unmask transactions tied to suspected tax dodgers, according to Chainalysis.

Related: Italy’s largest bank more than doubles crypto holdings to $235M in Q1: Report

“This landmark Italian case serves as a powerful reminder for law enforcement and compliance professionals globally: the technical novelty of crypto does not equal anonymity,” it said.

“As new digital asset classes continue to emerge and generate income streams, the gap between actual on-chain wealth and declared tax positions will become a primary target for global investigative attention. In today’s financial landscape, blockchain intelligence is essential infrastructure.”

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The former chief risk officer of Silvergate revealed she made the decision to settle with the US securities regulator in 2024 to avoid a “multi-year battle” in court, where she was accused of misleading investors about anti-money laundering rules and how the bank monitored crypto customers.

In her first public comments about her settlement with the SEC on Wednesday, Kate Fraher claimed that no financial agency proved that Silvergate’s anti-money laundering controls had failed, and that she only opted to settle to “move forward.” 

Fraher had agreed to a civil penalty of $250,000 and was banned from serving as a company executive or board director for five years.

“The process itself is designed to apply maximum pressure, and the human costs are real. I was personally de-banked and had credit lines summarily closed—an aggressive tactic used to disrupt daily life and force compliance,” she said. 

The comments provide more insight into the circumstances surrounding the wind-down of Silvergate, a crypto-friendly bank that voluntarily closed following the collapse of FTX. Fraher said her ability to comment came after the SEC rescinded the long-standing “gag rule” on Monday.

Source: Kate Fraher

Fraher said the wind-down was not because of a “bank run” or market volatility from FTX’s collapse in November 2022, even as the bank experienced a deposit run of around 70%. 

Instead, Fraher said the company chose to wind down because the “broader administrative and regulatory pressure levied against the digital asset industry made operating a viable business impossible.”

Many crypto industry pundits labeled this as “Operation Chokepoint 2.0,” an unconfirmed plan in which US financial regulators cut off banking services to crypto companies in an attempt to restrict their ability to operate within the broader financial system. 

Silvergate wasn’t the only crypto-friendly bank affected by the strict measures, which intensified following the collapse of FTX in November 2022.

Signature Bank and Silicon Valley Bank also shut down in early 2023, in part due to deposit runs, liquidity stress and contagion effects tied to FTX and several crypto lending platforms that went bankrupt in 2022.

Related: Trump-backed Truth Social pulls bids for crypto ETFs 

But Fraher said by the beginning of 2023, it had weathered the FTX collapse by restructuring the business with “appropriate capital levels” and a “right-sized workforce” to continue operations safely.

Gag policy was unconstitutional, Fraher argues

Fraher applauded the current Paul Atkins-led SEC leadership for ending the gag rule, which she described as an “unconstitutional policy.”

“I am glad the right to speak the truth has finally been restored,” Fraher said, adding: “We must continue to talk about the long-term professional and personal toll exacted on individuals by regulation through enforcement.”

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