Why FIFO in your Source of Funds report does not prove where the money came from

Your bank has asked where your crypto came from. Your tax tool offers a Source of Funds report for exactly this moment. It picks a withdrawal, follows it back through your trades and transfers, and shows where the money came from. It feels as if the answer is already sitting in your downloads folder.

It almost never is. The report answers a narrower question than the one your bank is asking, and one small rule shapes much of what it shows: FIFO.

What FIFO actually is

FIFO stands for “first in, first out”. When you sell some of your coins, your tax software has to decide which coins you sold. FIFO gives a simple answer: the oldest ones. Your first purchase is used up first, then your second, and so on.

For tax, this makes sense. One bitcoin is identical to another, so nobody can say which particular coin left your wallet, and the tax office needs a consistent way to calculate gains and holding periods. FIFO is an accepted way of doing that. It is consistent, repeatable and easy to check.

It was never designed to answer the question your bank is asking.

A simple example

Picture one exchange account.

In January you deposit 50,000 EUR worth of bitcoin that you bought with your salary. Clean, and you have the bank statements to show it.

In March, another 50,000 EUR worth of bitcoin arrives from a source you cannot document. Perhaps a private sale years ago, paid in coins, with no paperwork left.

In May you withdraw 50,000 EUR to your bank.

Under FIFO, the first coins in are the first coins out. The May withdrawal is matched to the January deposit, and the report says the money came from your salary. One hundred percent documented.

Now look at the same account the way a bank’s compliance team does. At the moment of the withdrawal, the account was one pot: half from a documented source, half from an undocumented one. The coins are identical, and nothing in the account says which half left. The fair description is that the withdrawal came from a pot that was half unexplained.

Same account, same data, two very different stories. The report tells the reassuring one.

The problem does not disappear, it moves

FIFO does not make the undocumented 50,000 EUR go away. It pushes it to the back of the queue, where it will attach itself to the next withdrawal.

But the person reviewing your file only sees today. They will never see the account’s future. And if the rest of the balance never reaches a bank - it stays in a wallet, gets spent somewhere else, or is simply lost - nobody will ever look at it. A rule that moves the question past the moment someone is checking is, for the person checking, a rule that hides it.

None of this means that people who use tax tools are hiding anything. Most histories contain nothing questionable at all. The point is that the report cannot tell the difference, so a bank cannot rely on it to.

What if you withdraw everything at once?

Then FIFO has nothing left to push to the back of the queue. Withdraw the full 100,000 EUR in the example, and both deposits are used up. The report shows the whole mix: half salary, half undocumented. On that point, it is accurate.

It is still an answer about one withdrawal, from the accounts you chose to import. Where the money for the January deposit came from, whether other wallets exist, who sent the March coins, and whether the gains in between make sense are all outside the question the report was built to answer. A Source of Funds report can be complete about one transfer and still say very little about you.

Two questions, and a report built for one of them

A bank asks two separate things, explained in more detail in Source of Funds vs Source of Wealth. Source of funds: where did this particular transfer come from? Source of wealth: how did you build what you have?

The Source of Funds report from a tax calculator is well named, and it does not aspire to be what it is not. It answers the first question, one withdrawal at a time. The trace starts at your first deposit into crypto and has nothing to say about where the money for that deposit came from. Your salary, a property sale or an inheritance sits outside what any tax calculator can see.

It is also, by design, a model rather than a record. Where coins from different sources were pooled, nobody can say which ones left, so the report applies a rule and follows it through. That is a reasonable way to produce an answer. It is still an assumption about what happened, not evidence of it.

Why a partial report cannot be trusted

A Source of Funds report covers the accounts you imported and the withdrawal you chose to explain, and a reviewer has no way to tell whether that selection is complete. A file that shows part of the picture cannot vouch for the rest.

The report also reached the bank through you. A PDF built from your own export is your account of events, however accurate, and some banks say it outright: an export can be edited. A bank cannot use you to confirm you.

Banks are noticing. On an Austrian finance forum, a holder described a bank that rejected a tax-tool report together with a confirmation letter from a tax adviser, and accepted only the full trail from bank account to exchange and back again.

What is inside a Source of Funds report

Blockpit publishes an example of its Source of Funds report, dated 6 November 2025. It explains one 99.82 EUR withdrawal from five days of history. The trail ends at a Binance deposit labelled “Fiat Deposits”, with nothing about the bank account behind it.

It seems to offer counterparties, but the wallets it lists are the user’s own and the exchanges have no address. The one deposit from outside, a 0.16 EUR “Gift”, has no transaction hash and no named sender, and 3 of the 28 transactions, including the withdrawal itself, are typed in by hand. There is no stated method and no balance to check the result against.

The report’s own notes say it “does not replace an officially certified Proof of Source of Funds”.

What a bank can rely on instead

A file that holds up in bank review is a Source of Wealth report, not a Source of Funds report. Such a report usually has seven things:

• A stated method. How the file decides which money went where, written down so a reviewer can check it rather than trust it.
• Mixed money shown as mixed. Where deposits from different sources were pooled, the file shows the proportions, not whichever deposit happened to arrive first.
• Checked counterparties. Who sent each deposit that did not come from your own accounts, and whether that source carries risk. This often takes extra work. Many tax tools do not record the sending address, because tax does not need it; Kryptos and CoinTracking are among those that do. Exchanges rarely export it either: depending on the exchange, a fifth to half of transfers arrive without it, and someone has to dig it out of the transaction record. A sender nobody identified is a sender nobody checked.
• Gains that make sense. Where your wealth grew quickly, the file shows how. A reviewer can then tell an ordinary rise in the market from a trade that looks like insider dealing in a thinly traded coin, which is illegal in the EU.
• The origin before crypto. Payslips, a business sale, an inheritance: documents from outside your own transaction history, because a bank will not accept a history that only vouches for itself.
• Balances that add up. What you hold today is what you put in, plus what you gained, plus what moved in and out, so an exchange account works like a bank account and an investment account in one. A Source of Wealth file checks that sum for every account against the balance the platform actually shows. Nobody expects perfection: a file that explains nine tenths of your balance can still be fine. A Source of Funds report cannot be checked this way. Its percentages always total 100 percent of the withdrawal, because that is how it is built.
• Room to challenge. You, and the bank, can point at any line and ask where it came from.

How to prepare a Source of Wealth claim, step by step, is set out in How to write a source of wealth file the bank can check. The evidence pack to go with it, from bank statements to every wallet address you control, is listed in The 12 documents your bank will ask for.

Where your tax report still fits

This is not an argument against tax reports. Your tax report remains the fastest complete inventory of your accounts, and whatever you tell the bank has to match what you told the tax office. If you already use Kryptos or CoinTracking, the same data can be the starting point for your Source of Wealth file, so both declarations are built from one set of records.

It is also fair to say where the line is. For a modest transfer from a regulated exchange into an account in your own name, a bank may never ask for more than a statement. The difference shows when the amount is large or the history is mixed, which is exactly when a file is read closely.

How the tax side and the Source of Wealth side fit together is set out on the tax page, including what to bring from your tax calculator.