How can bitcoin be traced? Bitcoin's privacy properties are a kind of paradox: Every Bitcoin transaction that occurs in the entire payment network is recorded in the "blockchain," Bitcoin's decentralized mechanism for tracking who has what coins when, and preventing fraud and counterfeiting. Can you be taxed in bitcoin? Bitcoin Are Not Money for Tax Purposes. Although Bitcoin can be used like money, they are not considered to be money (legal tender) by the IRS or any other country. Instead, they are personal property, much like gold or corporate stock. ... IRS Form 8949 is used to report capital losses and capital gains. So dont worry if government traced you.