I agree that unhosted wallets are how crypto was meant to be used, and the only way it makes sense—you don't need a decentralized BFT protocol with proof-of-wor

I agree that unhosted wallets are how crypto was meant to be used, and the only way it makes sense—you don't need a decentralized BFT protocol with proof-of-work if all transactions involve a limited set of centralized exchanges, and proof-of-stake is meaningless if only exchanges hold coins. However, it's wrong to say that this offers any protection against the IRS. Legally speaking the tax obligations are exactly the same for hosted and unhosted wallets, and in practical terms merely keeping your coins in unhosted wallets is not an effective means of hiding income from the tax man.