I have trouble understanding how privacy coins, such as monero, have utility.

If I hold coins that I purchased through an exchange then I can be identified as the owner of any wallet that I subsequently transfer those coins to. It’s all on the blockchain.

Let’s say I purchase some BTC and transfer from a CEX to a wallet, at some time in the future I convert to USDC for a profit. That transaction is linked to me via the CEX KYC and I can be tracked down by the tax office to pay capital gains.

If however I purchase Monero rather than BTC then it can’t be tracked. I convert to BTC on my private wallet, then take profit when I convert to USDC. So long as I don’t connect to an off-ramp my transactions remain private and anonymous.

But how does that help? The best I can do is to transfer some or all of my USDC onto a CEX via Monero before withdrawing it to fiat. What do I say to the tax people? They will want to know where it came from so they can work out the tax.

Yes I can hide all my transactions, avoid having to pay capital gains tax at tax points, but at some point I am stuck getting it out as fiat.