The private key is an identification code of the “wallet”, the electronic device used to store digital currencies, generated in the activation and authentication procedure for access, to allow the use of cryptocurrencies, in turn connected to a public key.

As regards declaratory obligations, cryptocurrencies are treated as foreign currencies, therefore, their possession must be indicated in the section of the tax monitoring of investments abroad and foreign activities of a financial nature likely to produce taxable income in Italy, of the tax return.

It is useful to clarify what a “wallet” for cryptocurrencies is and how it works.

The electronic wallet is, in fact, a software that allows you to access digital coins, to exchange them and use them for operations. Cryptocurrencies are digital, have no physical form and are not stored in any physical place. The “wallet” does not contain cryptocurrencies, it simply communicates with the various blockchains (the various “digital ledgers”) and interacts with these thanks to two codes: the private key and the public one.

With regard to the principle of territoriality, it can be concluded that the obligation to indicate in the RW section of the tax return does not exist whenever the natural person has the availability of the private key, which is the “means” through which the same person manifests the will to dispose of the cryptocurrencies.

The tax monitoring obligation should therefore not be fulfilled where the natural person resident in Italy has the availability of the private key, given that in this case the place of holding of virtual currencies can only be coincident with the State where the taxpayer is resident for tax purposes. In this case, in fact, you should not speak in any way of assets held abroad.