What is a crypto transaction classification layer?
A crypto transaction classification layer turns an on-chain transaction hash into a US tax-treatment record: a canonical category, one of five treatments (disposal, income, non_taxable, expense, or needs_review), a confidence score, and a review flag. Classification only. Not cost-basis math, not a filing product, and not a portfolio tracker.
You enter a hash. You get what happened, how US framing maps that shape, how strongly the evidence agreed, and whether a human should take the row. That is classification. CryptoTaxEdge is that layer as an API and as practitioner surfaces. Platforms embed POST /v1/classify. CPA firms use the Classification Explorer and related tools alongside the books they already keep.
What the layer does
Classification answers six questions on one hash. The wire contract is the same whether you call the API, the Explorer, or the MCP server.
- What happened. Receipt-derived legs: what left, what arrived, amounts as decimal strings, protocol identification where the engine can make one. Evidence comes from on-chain data, not from a CSV label someone typed earlier.
- Category. The transaction shape on an open vocabulary (
swap,wrap,liquidity_add,staking,bridge_transfer, and the rest enumerated in the Classification Standard). Display the category. Do not build exhaustive branch logic on every possible name; the set grows additively. - Treatment. One value from a closed enum:
disposal,income,non_taxable,expense, orneeds_review. Safe to branch on. US framing is general context (for example §1001 for dispositions, §61 for ordinary income), not tax advice. - Confidence. An integer from 0 to 100. It is a corroboration and routing signal: how well the available evidence agreed, and whether the record is served as a treatment or sent to a human. It is not an accuracy percentage and not a probability that the treatment is correct.
- Evidence and grey area. Where a treatment is genuinely contested, the record can carry a documented house default and the alternative (
grey_area). Firms can configure those positions. CryptoTaxEdge describes positions and their basis; it does not assert a filing position for any taxpayer. - Needs review. When the engine cannot honestly assert a treatment, it returns
needs_review: truewithtaxable: null. A flagged row belongs in a review queue, not in the books. Deferring is designed behavior, not a failure.
One call looks like this:
POST https://app.cryptotaxedge.com/v1/classify
{ "chain": "ethereum", "hash": "0x..." }
→ category, treatment, taxable, confidence, needs_review,
protocol, grey_area, assets.sent / assets.received
The same engine serves batch classify, the Classification Explorer, the Chrome extension, and the MCP server. A sanitized example record is at /examples/sample. How a hash becomes a treatment in more detail: How is crypto tax treatment determined? What a review flag means: What does needs_review mean?
Enrichment vs classification
Enrichment is the evidence layer: fetch the receipt, decode transfers, label contracts, assemble legs. Classification is the determination layer: map that evidence to a category and a treatment under a published taxonomy, with confidence and an honest deferral when the evidence does not settle.
Without enrichment, there is nothing honest to classify. With enrichment alone, you still do not have a tax treatment. The classification layer is the step that turns decoded legs into a closed treatment enum (and needs_review when it will not guess). CryptoTaxEdge ships both: multi-source enrichment into the classify call, then the published category and treatment set. Method and measured studies live on the methodology page. The versioned vocabulary and review contract live on the Standard and the practitioner taxonomy.
Who uses it
Platforms and developers. Tax platforms, crypto subledgers, wallets, and accounting tools embed classification by API or MCP instead of maintaining a DeFi rules engine themselves. One hash in; category, treatment, confidence, and review flag out. Integration patterns: What you can build with the CryptoTaxEdge API and MCP.
US CPA firms and crypto-native accountants. Firms use the Explorer for spot hashes, the extension as a read-only overlay on the platform they already use, and exports for workpapers. CryptoTaxEdge works alongside Koinly and CoinTracker, not as a replacement. The platform still holds the book, the lots, and the forms. We classify the hash.
What it is not
- Not a cost-basis engine. We do not reconstruct lots, assign proceeds, or populate Form 8949.
- Not a filing product. We do not generate returns or amend information returns.
- Not a portfolio tracker. No balances, no P&L dashboard, no wallet connect, no custody, no private keys. Hash in only.
- Not a guess dressed up as confidence. Low agreement or unresolved shapes are
needs_reviewwithtaxable: null. - Not CryptoTax.com. Different product, different company. Brand disambiguation: CryptoTaxEdge is not CryptoTax.com.
This is informational only, not tax advice; verify with a qualified tax professional before filing.
Accounting firm with crypto clients? See the Firm plan.