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No-KYC bitcoin, p2p trading and proof of the source of funds

Proof of cost and origin · Articles 105 and 106 LGT · off-ramp and money laundering
Spanish income tax on crypto: how IRPF works 6 min

There is a very relevant part of the bitcoiner ecosystem that mainstream tax commentary barely addresses: activity outside the classic exchange. Purchases between private parties, direct sales, receipts through platforms with little intermediation, early self-custody and movements between one’s own wallets are part of the reality of many taxpayers. The error of the simplistic analysis is to believe that, because such activity leaves no bank statement or tidy exchange CSV, it also ceases to have tax relevance. It does not. The problem, let us say it clearly, is not so much one of liability to tax as one of evidence.

The right approach is not ideological, neither for nor against the no-KYC model. It is strictly technical and evidentiary. In a heavily banked society, the need to surface value to buy a property, finance an investment, justify one’s wealth to an institution or move significant amounts into the financial system forces one to face the decisive question head-on: how does the Spanish taxpayer prove the origin, the date and the tax cost of crypto-assets acquired outside the usual circuit?

It is worth clarifying that the reporting regime for crypto-asset service providers —Forms 172 and 173 and, going forward, the CARF/DAC8 framework— falls on exchanges and custodians, not on the private individual who sells directly; hence, precisely, P2P activity remains outside that reporting and the burden of proof shifts entirely to the taxpayer.

Evidence is not monopolised by the exchange invoice

The first idea is simple: the absence of an exchange invoice is not equivalent to the absence of evidence. In tax law, proof of the taxable event, of the acquisition value or of the date of purchase is not legally reserved to a single means (Articles 105 and 106 of the General Tax Act (LGT): the former places the burden of proof on whoever asserts their right —here, the taxpayer invoking a particular acquisition value or date—; the latter refers back, as to means and assessment, to the rules of the Civil Code and the Civil Procedure Act, without reserving evidence to a single means). A taxpayer can build a solid position from a coherent set of converging indicia and documents.

The second idea, more important still, is that not all evidence is worth the same. An Excel file redone later, with no external backing, is of little value. By contrast, a file assembled with dated screenshots, transaction identifiers (txid), verifiable on-chain movements, counterparty evidence, linked euro payments and a valuation criterion consistent with the FIFO method that the Directorate-General for Taxes has been requiring for homogeneous crypto-assets (among others, rulings V1604-18 and V2520-22), so that the cost-to-sale allocation is not arbitrary, begins to be something else. The point is not to aspire to an impossible perfection, but to minimise the room for arbitrary reconstruction after the fact.

The three questions the taxpayer must be able to answer

From a tax standpoint, one must be able to answer three distinct questions. Where the funds came from or what transaction generated the original acquisition of the crypto-assets. When they were acquired and at what value. And how those original assets connect to the ones finally sold, swapped or taken into the banking system. Many positions fail not because the taxpayer lacks an economic case, but because they have been unable to join those three planes documentarily.

Proof of the acquisition cost is the crux. Anyone who cannot reasonably substantiate how much they paid for the assets they later sell is exposed to a severe tax reassessment: not because the whole position becomes a gain, but because the acquisition value may be eroded or disputed and, in the extreme case of a total lack of evidence, no deductible cost may end up being admitted at all, so that the gain approaches the entire sale price. In old transactions, prudence requires reconstructing that cost file as soon as possible, without waiting for the moment of sale, which is usually the worst time to start organising the evidence.

Self-custody: it shifts the burden of proof to the holder

Self-custody does not, in itself, create a tax problem, but it does shift to the taxpayer an essential part of the burden of proof. When the asset lives for years outside centralised custodians, the blockchain proves the movement, but not always the economic identity of the counterparty, the price actually paid or whether an intermediate wallet is one’s own or a third party’s. It is therefore always advisable to separate, within the file, one’s own wallets, those of third parties, bridge wallets and those of temporary custody. Grouping everything under the generic label of “my addresses” is a frequent and costly error.

The banking off-ramp: taxation and evidence are not the same

There is a connected but distinct question: the exit into the banking system. Many operate for years outside the exchange and only consider the problem when they want to buy a home, make a contribution to a company or pay significant amounts into an account. At that point the debate ceases to be purely fiscal and also enters the sphere of money-laundering prevention and the source of funds. A gain correctly reported in IRPF does not, on its own, meet the evidentiary requirements that a financial institution may raise. Operational opacity should not be confused with legal certainty: they are distinct planes, and the second, sooner or later, requires evidence.

Hence a concrete recommendation: build a surfacing dossier before you need it. It is not a solemn document or a unilateral declaration, but an orderly working file, with the chronology of the acquisitions, the associated external evidence and a reasonable explanation of the asset traceability. Its usefulness is not cosmetic, but defensive.

To this is added, where applicable, compliance with any reporting obligations that may apply —notably Form 721 on balances of crypto-assets located abroad, where the thresholds are exceeded—, the breach of which opens a sanctioning front of its own, independent of the acquisition cost.

Minimum practical checklist

  • Identify your own wallets and separate them from those of third parties or bridge wallets.
  • Reconstruct, in tranches, the cost and date of acquisition, even if the original documentation is imperfect.
  • Associate each relevant transaction with external evidence: txid, screenshot, euro payment, message or receipt.
  • Prepare, before the off-ramp, a source-of-funds and asset-coherence dossier.
  • Avoid leaving the first documentary ordering of years of activity until there is already banking or audit pressure.
An essentially evidentiary question, not one of liability: no-KYC activity is taxed in the same way, but it shifts to the taxpayer the burden of substantiating origin, date and cost. Operating outside custodians with reporting reduces the initial visibility, not the obligation to pay tax nor that of proving the origin of the assets.