Tax authorities like the IRS, HMRC and ATO classify crypto as a capital asset, meaning that sales, trades and even swaps are considered taxable events. Tax authorities worldwide are coordinating through frameworks like the FATF and the OECD's CARF to track transactions, even across borders and privacy coins. Authorities use blockchain analytics firms like Chainalysis to link wallet addresses with real identities, tracking even complex DeFi and cross-chain transactions.