Merlin Chain runs alongside Bitcoin rather than on top of it. Your address starts with 0x and gas is paid in BTC.
Bitcoin deposited here does not stay under your control. It goes to an address managed jointly by Merlin and a custody firm, and you receive a token called M-BTC in return.
That arrangement matters for tax, because handing an asset to a custodian and receiving a different, tradeable token back is not obviously the same as moving your own money.
What you get out of the box
Pick your import method.
On Merlin Chain
- Open your wallet and copy your address. It starts with 0x.
- Add your Bitcoin wallet as well if you deposited from it. That side of the transaction is not visible here.
On Kryptos
- Go to Kryptos.io and sign up with your Google account.
- From the menu, click Integrations.
- Click Add Integration and search for Merlin Chain.
- Click the Merlin Chain icon, then choose Import using Address.
- Give the wallet a name, paste your address, and click Import Your Transactions.
Good to know
- Deposited bitcoin is held by a custody firm, not by you and not by a contract you control.
- M-BTC is a distinct token from bitcoin and can be staked, which makes it harder to argue it is the same asset.
- Activity on this chain has fallen a long way from its peak, so expect a thin recent history.
Who is holding your bitcoin
Bitcoin layer 2 is a marketing phrase covering at least four different arrangements, and the differences matter for tax. In one, your BTC is locked by Bitcoin's own rules and you keep an enforceable claim on it. In another, it goes to a named custody firm. In a third, a stranger swaps you a token for it. Those are not the same event, and treating them alike is how people get this wrong.
Merlin is the custodial case, and it is worth being direct about that because the branding is not.
When you deposit bitcoin, it goes to an address on the Bitcoin network controlled jointly by Merlin and an institutional custody firm, using an arrangement where the signing key is split so no single party holds it outright. That is a reasonable security design. It is still custody: the bitcoin is not yours to move any more, and getting it back depends on those parties behaving.
What you hold instead is M-BTC, a token on Merlin that represents a claim on that custodied bitcoin. It is freely tradeable, and it can be staked to earn yield, which makes it a rather different instrument from the bitcoin you put in.
Put those together and the case for calling the deposit a non-event is weak. You gave up possession of one asset to a third party and received a different asset with different properties. In most countries that reads as a disposal of the bitcoin and an acquisition of M-BTC, at the value on the day. We would rather say that plainly than let somebody assume it was a simple transfer and find out otherwise. Where the amounts are material, take it to an accountant. For how crypto-to-crypto exchanges are treated where you file, see the USA crypto tax guide or the UK crypto tax guide.
Manage your Merlin portfolio with Kryptos.
Depositing bitcoin for M-BTC
Your bitcoin goes to a custody address and you receive a different token. Whether that is a disposal is a real question rather than an obvious no.
Staking M-BTC
The token can be staked for rewards, which is income separate from anything the underlying bitcoin does.
Recording the MERL distribution
Half arrived on claim and half vested afterwards, so one entitlement produced receipts on two different schedules.
Audit-ready, automatically.
Once your wallets and exchanges are connected, generating a tax report takes a single click. Open Reports from the menu, choose your jurisdiction, and download.
Depositing bitcoin here is probably a disposal
You give up control of the bitcoin to a named custody firm and receive a different, freely tradeable and stakeable token. That is a weaker case for a non-event than almost any other route in this group, and the conservative treatment is a disposal at the value on the day.
M-BTC is not bitcoin
It represents bitcoin held by somebody else. Treating it as the same asset understates both the risk and, on most readings, the tax position.
The distribution arrived in two parts
Half of the MERL allocation was released on claim and half vested afterwards. Each part is a receipt at its own date and price.
Deposits may have come from inscriptions
Some deposits into the earlier staking programme were made in Bitcoin-native token formats. Those legs sit on Bitcoin and do not reconcile automatically against the credit on Merlin.
Read-only by design.
- Kryptos only ever needs your public wallet address
- A public address is read-only. It can't move or spend anything
- We never ask for your recovery phrase or private key
- Remove a wallet whenever you like, and its data goes with it
If something doesn't sync.
Check the Merlin side. The bitcoin went to a custody address and M-BTC was issued to you on this chain instead.
They are two positions, but only one lot of value. If you still show the original bitcoin as held, the deposit has not been recorded.
Merlin's explorer runs behind the chain itself, sometimes by thousands of blocks. Recent activity may not have appeared yet.
Still stuck? Email support@kryptos.io or open live chat from the app.