Crypto Tax and Source of Wealth - explained in circles
Three drawings that show where a Source-of-Wealth Claim sits next to your tax report and a blockchain analysis, and why your bank wants all three to agree.
Ask three crypto holders what a bank means by “proof of funds” and you get three answers. One sends the tax report. One sends a blockchain analysis a friend ran on their wallets. One sends everything and hopes. Banks are less confused than their customers: to a compliance officer these are three different documents answering three different questions. The quickest way to explain the difference is to draw it. So here are three drawings.
Circle one: three tools, three questions
A crypto tax calculator answers one question: what do you owe? It takes your trades, applies the rules of your country and produces realised gains per year and the tax on them.
A blockchain analytics tool answers a different question: where did these coins move? It follows addresses across chains, attaches labels and flags exposure to illicit activity.
A Source-of-Wealth Claim answers the question the bank is actually asking: how did this person build this wealth, and can it be shown? It sits between the other two. It borrows the realised gains from the tax side, because a bank wants to see an estimate of the same figures your tax office sees, to exclude tax fraud. It borrows the labels and risk screening from the analytics side, because a bank has to know who the client’s counterparties were and whether anything in the history touches sanctioned or criminal funds. Then it adds what neither tool produces: the fiat deposits and withdrawals, the growth of the portfolio (unrealised gains), and a story a reviewer can follow from the first deposit to today.
The circles overlap, and that is the point. None of the three replaces another. Send a tax report alone and the bank still has no origin story. Send a blockchain analysis alone, and the bank has a list of addresses with inflows and outflows but no idea what gain you made, what tax you owe, and what happened on the crypto exchange that sent the fiat money. CashoutReady is the circle in the middle.
Circle two: who does what before the bank
The second drawing is about people rather than tools. It reads in one direction: from you, through two services, to the bank.
You come first, and your one job is to supply a complete history: every exchange account, every wallet, every transfer between them. You should have to do this once.
In the middle sit two services that work from that history. The tax calculator turns it into a tax report. CashoutReady turns it into a Source-of-Wealth Claim. A shortcut: if you did your taxes with CashoutReady’s partner calculators, Kryptos or CoinTracking, or plan to, the history they hold is the one the Claim is built from, with the same accounts and the same transactions. One import, two declarations. Where the two middle circles overlap is the shared data, and it is the reason the realised gains in both documents reconcile.
Last comes the bank. It receives both documents and makes the only decision that matters: whether the money can land. A bank that finds one figure for realised gains in the tax report and another in the Source-of-Wealth Claim will ask why. A bank that receives two documents built from one history usually does not have to.
Three things are missing from this drawing on purpose. A tax adviser is not a circle, because most cases do not need one, and where a case does, CashoutReady brings a partner adviser into it rather than adding a fifth party for you to brief. A Source-of-Wealth or AML forensic consultant is not a circle, because that work is covered by ChainComply, the company that runs CashoutReady. A blockchain analytics vendor is not a circle either, because the labels and the risk screening happen inside the Claim. Neither of the last two is something you have to buy separately.
Circle three: the overlap is realised gains
The third drawing answers the question that comes up most: “I have a tax report. Why is that not enough?”
A tax declaration is a focused document. It is about realised gains: the moments you sold, swapped or spent, and the tax those events triggered. It does not care about coins you still hold, about the fiat that came in from your bank, or about whom you traded with. It is not supposed to.
A Source-of-Wealth Claim is wider. It covers unrealised gains as well, because a bank wants to understand how €20,000 became €600,000 and most of that growth may never have been sold. It covers the fiat deposits and withdrawals: what came in from the banking system and what went back out, kept apart from what merely moved between wallets you control. And it carries the counterparty labels and an illicit-activity check on the wallets involved, because that is the first thing a compliance officer looks for and the last thing a tax report mentions.
What connects the two documents is realised gains. The figure in your tax return is part of the gains in your Claim, and a bank will compare the two, because a gap between them is the first sign of undeclared income. If both were built from one history, they match by construction. If they were built separately, by two firms working from two exports, they usually do not, and the follow-up questions start.
Why draw it at all
None of this is a how-to. The drawings are a way of thinking about three documents that are easy to confuse, and they exist because the confusion is real. Source of Wealth is a concept most crypto holders meet for the first time when a bank asks for it, and what the bank actually requires is rarely spelled out. The picture is muddied further by the source-of-funds reports some tax calculators now produce: a few pages built on the same tax logic, which look like an answer to the bank’s question and rarely are.
If the circles leave one idea behind, it is this: realised gains are where the tax report and the Source-of-Wealth Claim meet, and almost everything else the bank needs sits outside the tax circle. The tax page sets out how one import serves both documents.
None of this is tax advice, and no report guarantees that a particular bank will say yes. But there is a large difference between arriving with a pile of documents and arriving with the right tool for each of the bank’s questions.