How do you tax a cryptocurrency?

Could you elaborate on the complexities of taxing cryptocurrency? Given its decentralized and often anonymous nature, how does a government or tax authority determine the taxable value of digital assets? Do they rely on exchange rates? Are there specific tax brackets for different types of cryptocurrencies? And how do they ensure compliance, especially with the increasing use of privacy-focused coins? I'm curious to understand the challenges and methods employed in this rapidly evolving field.