Reporting customer transactions for crypto firms: 5 things you need to know

Financial regulation in the UK is set for some big changes in January 2026. HMRC is going ahead with changes to the Organisation for Economic Development's Cryptoasset Reporting Framework (CARF), with some domestic extensions. 

This change is essentially the most comprehensive crypto transaction monitoring regime introduced by any major financial jurisdiction. It will require crypto service providers to collect and report detailed customer data for every transaction, something that some enthusiasts find conflicting with crypto’s core value proposition.

The framework is a part of Chancellor Rachel Reeves' broader strategy of positioning Britain as "open for business but closed to fraud, abuse and instability". With UK crypto adoption rapidly going from 4% to 12% of adults between 2021 and 2024, these measures are directly addressing the growing need for tax transparency.

The UK adopts international crypto reporting standards

The UK's implementation of CARF is all about alignment with OECD standards, all whilst extending beyond international requirements through domestic reporting provisions. Unlike traditional mechanisms for international tax information exchange, CARF is intentionally targeting cryptoasset service providers so that unprecedented visibility into digital asset transactions is monitored for tax authorities.

The framework doesn't come from nowhere - it builds upon the OECD's Common Reporting Standard methodology and adapts its reporting procedures for the unique nature of crypto transactions. The UK extending CARF domestically means that reporting obligations will apply to all UK residents, not just those in participating CARF jurisdictions, so that it creates comprehensive coverage of the domestic market.

This regulatory approach contrasts quite a bit with the European Union's Markets in Crypto-Assets Regulation framework, which focuses mostly on operational authorisation and consumer protection. The UK's focus on tax transparency through transaction reporting shows a different regulatory philosophy where fiscal compliance is prioritised over market structure controls.

The timing of this, post-Brexit, shows that some competitive advantages are trying to be made from the de-alignment.

Comprehensive data collection requirements come into force

The CARF framework will mean data is collected across three categories:

• Individual users

• Entity users

• Transaction details

Verification requirements will actually exceed traditional financial services due diligence standards. 

For individual users, reporting entities will collect complete identity profiles including full legal names, birth dates, residential addresses and country of residence. UK residents require National Insurance numbers or Unique Taxpayer References, whilst even non-UK residents will provide their own tax identification numbers. The framework even accommodates jurisdictions without TIN systems.

Entity reporting includes companies, partnerships, trusts and even charities, all of which require legal business names, addresses and appropriate registration or tax identification numbers. For certain entities, controlling person information must also be collected.

Transaction-level data collection is perhaps the framework's most operationally tricky aspect, requiring value documentation, cryptoasset type identification, transaction categorisation and the unit quantification for every trade and transfer made. This includes not only traditional buy-sell transactions but also complex DeFi interactions, staking activities and cross-platform transfers. 

The due diligence verification will require accurate confirmation through documentary evidence and electronic verification procedures. HMRC will, of course, provide specific guidance on acceptable verification methods, but early preparation means that reliable identity verification systems capable of handling broad international documentation standards are needed.

Reporting deadlines for compliance

The implementation timeline is now clear. Mandatory data collection begins from the 1st of January, 2026, though HMRC encourages earlier preparation to make sure your system is ready. 

Initial reports should be submitted to HMRC by the 31st of May, 2027, where there will then be an annual reporting cycle thereafter. This timing aligns with traditional tax reporting calendars, all while providing some processing time for complex transaction analysis. Registration with HMRC as a Reporting Cryptoasset Service Provider must occur by the end of January in 2027, creating a buffer period for administrative compliance.

HMRC is developing an XML-based online reporting system, which hints at sophisticated data handling capabilities beyond simple form submissions. The technical specifications will surely accommodate high-volume transaction reporting whilst maintaining data security standards. These new rules must not come at the cost of data security.

The framework anticipates some level of operational complexity by allowing phased implementation approaches, but core collection requirements very much remain a non-negotiable January 2026. Service providers should prioritise system modifications for data capture functionality early on, followed by staff training programmes.

Regular guidance updates from HMRC will address implementation challenges as they emerge, with the Automatic Exchange of Information helpline providing ongoing support for compliance questions. Early engagement with these resources proves essential for addressing jurisdiction-specific reporting requirements.

Who must comply and operational implications

Reporting obligations are in accordance with the Reporting Cryptoasset Service Providers (RCASPs). It includes the likes of:

• Exchanges

• Brokers

• Custodians

• Other intermediaries facilitating cryptoasset transactions or DeFi 

RCASPs must collect data on all users regardless of jurisdiction, though they will only report on UK residents and customers from CARF-participating countries. This shows that the UK is looking to lead the way and is hopeful that others will join in the future, but the dual requirement creates operational complexity, of course. Systems will have to distinguish between collection and reporting obligations whilst maintaining comprehensive records for potential future regulatory expansion - all while keeping this data safe.

The framework's scope includes all cryptoasset types, even novel tokens and synthetic assets, so this opens the door up to flexible classification given the ongoing market innovation. Transaction categorisation should distinguish between trading, transfers, staking, lending, among some other activities.

International service providers with UK customers are now confronted with particular complexity, as they must determine reporting obligations based on customer residence rather than business domicile. 

Enforcement penalties and global regulatory divergence

Non-compliance penalties reach £300 per user for inaccurate or incomplete reports, so this scales with large platforms to be a substantial amount for a mass problem. The per-user penalty incentivises comprehensive compliance rather than selective reporting, too, as enforcement costs scale. This is also fair to smaller firms.

The UK's approach differs quite significantly from EU regulation under MiCA, particularly regarding foreign stablecoin issuers and volume restrictions. The EU does indeed require some domestic authorisation for stablecoin issuers and has volume caps, while the UK permits foreign issuers to operate without UK registration and avoids volume limitations.

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