As a digital currency, there is no way to track or identify who is sending or receiving Bitcoin. This is a perfect way for a scammer to receive a lot of money with no way to track it down. If money can be made, the criminal element will be the first to exploit the new technology. This was the case with cryptocurrencies, and law enforcement is only now catching up and starting to assign real identities to cryptocurrency transactions.
Nowadays, law enforcement can use software to track and track bitcoin transactions and give them the clues they need to track money. Most of the time, the peer-to-peer exchanger acts as a money launderer for dark web activities. In practice, how can authorities such as the police, the IRS or the FBI track Bitcoin? Since law enforcement officers may not directly identify the parties involved in a Bitcoin transaction, they can try to observe the blockchain and analyze BTC movements and corresponding patterns. In this way, they seek to profile, deanonymize and identify people who carry out transactions.
In proactive crime-fighting cases, police track down criminals. When the offender exploits an unknown victim, the police can notify the victim of the crime regardless of whether the victim knows they were exploited or not. The police may be tracking certain cryptocurrency wallets or addresses, which may lead to a suspect behind the transactions. New advances in digital technology also allow researchers to view transactions to follow the virtual traces of money and reveal evidence about people who commit crimes.
Taken literally, these facts could be interpreted to mean that law enforcement has found some way to decipher the encryption of bitcoin wallets. This is highly unlikely, if not simply false. Tracking bitcoin wallets is difficult, but it's not beyond the resources of law enforcement. It's largely about using the public ledger and comparing dates and amounts.
If a tracked wallet is found in a friendly jurisdiction, it can be seized by court order. But taking possession of the wallet is not synonymous with decrypting the key and recovering the contents. Therefore, BTC transactions do not always remain 100% anonymous and the government can track Bitcoin ownership as long as (a series of) Bitcoin transactions can be linked to a person's identity. Bitcoin can also be taxable if it is considered income when someone receives a salary in BTC or receives Bitcoin for providing goods or services.
Events may be subject to taxes such as capital gains when Bitcoin is sold for cash, when BTC is converted into another cryptocurrency, or when Bitcoin is spent to purchase goods or services.
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