The United Kingdom is gearing up for a significant step to closely monitor the cryptocurrency market. The tax authority attached to the Treasury, HMRC, is developing new regulations that will require all crypto platforms in the country to report user transactions in detail by 2026. This decision is considered the UK’s most comprehensive crypto-related reporting initiative to date, aimed at preventing tax losses by monitoring both domestic and international crypto movements under a single umbrella.
Local Transactions Also Included
The new system is set to be implemented as an expanded version of the Crypto Asset Reporting Framework (CARF), developed by the Organization for Economic Cooperation and Development (OECD), in the UK. Preparing ahead of the global data-sharing process set to start in 2027, the government aims to increase transparency and remove crypto assets from being an “uncontrolled” area with this initiative.
CARF was initially designed for the standardized reporting of cross-border crypto transactions between countries. However, the UK has decided not to stop at international transactions and to include domestic users’ transactions as well. Authorities emphasize that this step will prevent crypto assets from remaining outside the Common Reporting Standard (CRS).
Under the new regulations, crypto service providers will be obliged to verify users’ identities, conduct background checks, and submit detailed transaction reports to HMRC annually. Although all transactions may not be included in the global automatic data-sharing, all transfers within the UK will be tracked through the national reporting system. The government argues that this approach will simplify reporting for companies while making it easier to detect tax evasion.
This development aligns with HMRC’s recent efforts to warn crypto investors more frequently about taxes. Officials particularly note that significant tax losses have occurred due to undeclared earnings, and with the new system, this gap can largely be closed.
“No Gain, No Loss” System and Industry Reactions
Simultaneously with the CARF expansion, the government announced a new tax mechanism called “no gain, no loss” for decentralized finance (DeFi) users. According to this, investors will not pay capital gains tax while holding their tokens, and tax liability will only arise during the disposition of assets. A majority of industry representatives participating in the consultation process have reportedly viewed this regulation positively.
However, the increased regulatory pressures have also led to criticisms in the sector. Some industry representatives argue that the regulations applied by the Financial Conduct Authority (FCA), especially for stable cryptocurrencies, are too stringent. They note that lengthy audit processes, waiting periods, and risk classifications are negatively affecting the user experience.
On the other hand, unlike the UK, new steps regarding crypto taxation are also on the agenda in the United States. It was recently reported that the IRS is drafting regulations to include transactions conducted through decentralized exchanges in the tax reporting system. This situation shows that the global crypto market is now subject to tighter financial oversight.
