How about just not paying taxes on the gains? Seems if one is careful with privacy tools you can probably fly under the radar a lot.

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how will they know if you don't report it?

How do they ever know? Audits. I am not interested in breaking the law and finding out how they know at trial before being thrown into a cage. Especially for capital gains of all things. The tracking is just annoying, but I'm not risking prison for this.

Probably isn't good enough when getting thrown into a cage is a potential outcome.

Paying the capital gains tax itself isn't my main issue. My main issue is with tracking every little transaction (buy and spend). It's fucking tedious. I could let software do it probably but that opens up a whole new privacy concern when it's already bad enough.

You're probably right. I still don't know though how they would track funds through coinjoin -> self custodial lightning -> gift cards for example