UK widens crypto reporting rules to cover domestic transactions

UK introduces new reporting rules for domestic crypto transactions

The United Kingdom is set to implement new regulations requiring crypto platforms to report all transactions conducted by domestic users starting in 2026. This change marks a significant expansion of the existing Cryptoasset Reporting Framework (CARF), which has primarily focused on international transactions. The move aims to enhance tax compliance and ensure that the UK's tax authority, His Majesty’s Revenue and Customs (HMRC), has access to comprehensive transaction data.

Understanding the Cryptoasset Reporting Framework and its implications

The CARF, developed by the Organisation for Economic Co-operation and Development (OECD), is designed to facilitate the automatic exchange of crypto transaction data among tax authorities globally. The framework mandates that crypto asset service providers conduct due diligence on users, verify identities, and report detailed transaction information annually. Previously, the framework did not cover transactions occurring solely within the UK, but with the new rules, domestic transactions will also fall under HMRC's scrutiny.

Global movements in cryptocurrency taxation and compliance enforcement

As cryptocurrencies become more integrated into the financial mainstream, governments around the world are revising their tax codes to better capture digital asset activities. For example, South Korea's tax authority has begun seizing cryptocurrencies from cold wallets suspected of being used to evade taxes. Similarly, Spain is considering raising its top tax rate on crypto gains significantly. This global trend reflects a growing effort to regulate the crypto market and ensure compliance with tax obligations.

Potential effects of UK reporting changes on crypto businesses and users

The introduction of these reporting requirements is expected to streamline compliance for crypto companies operating in the UK. By providing tax authorities with a more complete dataset, officials intend to identify non-compliance issues more effectively. Additionally, the UK government has proposed a 'no gain, no loss' tax framework for decentralized finance (DeFi) users, which would defer capital gains taxes until the tokens are sold, a move that has been positively received by the local crypto industry. These changes are likely to have significant implications for how crypto businesses operate and how users engage with digital assets moving forward.