But the Australian Taxation Office has now put them on notice, as it begins to collect records from exchanges to hunt down evaders.

The ATO this week launched a data-matching program to help sift through transactions in the volatile digital currency market and catch taxpayers who aren't properly disclosing their income.

The number of Australians invested in cryptocurrency has exploded since Bitcoin made worldwide headlines in 2017.

One survey suggested about 300,000 Australians had bought in about the time Bitcoin's value began jumping from $US900 ($A1,286) to $US20,000 ($A28,595) by the end of that year.

It has since plummeted to about $US5,000 ($A7,144).

But the countless nerds-to-riches stories saw Bitcoin and its spin-offs - known collectively as altcoins - move beyond darknet drug markets and into conversations at suburban dinner tables.

The ATO estimates between 500,000 and one million Australians are now invested in "crypto assets".

Its phenomenal growth spawned thousands of new currencies, many of which were scams, as well as hundreds of trading platforms, many of which were being manipulated or hacked.

Countless projects disappeared with millions of invested dollars - and Australians were caught up in the speculative madness.

The ATO says cryptocurrency has been used to move funds within the black economy and hide money offshore, and is linked to unexplained wealth and undeclared taxable capital gains.

It acknowledges it has "limited data" on the level of investment, gains, losses and transactions made by Australian taxpayers, who - along with third parties - have limited obligations to provide such information.

With the help of other regulators and international agencies, it is collecting in bulk data from designated service providers to identify people who aren't paying their fair share of tax, whether deliberately or unintentionally.

"We want to help taxpayers to get it right and ensure they are paying the correct amount of tax," Deputy Commissioner Will Day says.

Those of interest will be contacted by the ATO and given 28 days to clarify any information provided.

NSW Police, however, are interested in more than just tax avoidance.

Since Bitcoin was launched in 2009, the force's Cybercrime Squad has seen drug dealers, thieves, fraudsters and terrorists use the technology to avoid detection.

"Criminal syndicates have consistently used cryptocurrency due to its anonymity and the accepted use of cryptocurrency by darknet markets," Detective Inspector Gordon Arbinja has told AAP.

The exchanges are a known tool for crooks but changes to money-laundering and counterterrorism laws in 2018 forced them to register investor details.

Still, the ever-changing technology is a "great challenge" for authorities.

"(Crypto) is in effect borderless, very difficult to detect and police are required to keep up with an accelerating technological landscape," Det Insp Arbinja said.

The ATO has already met with potential data suppliers and samples obtained so far are "acceptable". The data-matching project will be ongoing.

Australian Associated Press