New UK Regulations: Crypto Firms Must Report Customer Data to HMRC

In an effort to crack down on tax evasion associated with cryptoassets, the UK government has introduced new regulations under the Reporting Cryptoasset Service Providers (Due Diligence and Reporting Requirements) Regulations 2025. This legal framework, set to take effect from January 2026, aligns the UK with the Organisation for Economic Co-operation and Development’s (OECD) Crypto-Asset Reporting Framework (CARF).

What Does This Mean for Crypto Businesses?

UK businesses involved in transferring or exchanging cryptoassets will now be required to conduct due diligence and report specific customer information and transaction details to HMRC. This change targets businesses facilitating the exchange of cryptoassets for fiat currency, other cryptoassets, or goods and services. The goal is to enhance tax transparency and ensure compliance across borders.

How Does This Affect You?

If you're a UK-based crypto service provider, you must register with HMRC's Automatic Exchange of Information (AEOI) portal. This requirement also extends to those reporting crypto activities in other jurisdictions under the CARF. Failure to comply could lead to penalties, particularly for not collecting valid self-certifications from users regarding their tax residency.

Why Now?

The crypto market's rapid evolution and the potential for tax evasion have prompted this regulatory move. While the UK has existing protocols for traditional financial accounts under the Common Reporting Standard (CRS), this new framework ensures that cryptoassets do not provide a loophole for avoiding these obligations.

Consultation and Industry Response

The regulations follow a government consultation earlier in 2024, which garnered feedback from crypto businesses and other stakeholders. Most respondents supported the initiative, recognizing the need for a standardized international reporting approach. Although the current rules focus on non-UK residents, future legislation may expand to cover UK resident customers.

What's Next?

HMRC is developing detailed guidance to help businesses navigate these new requirements. The impact on small businesses will be monitored, but exemptions are unlikely due to the international nature of the CARF.

For UK crypto service providers, staying informed and compliant with these new regulations is crucial to avoid penalties and contribute to a more transparent and fair tax system.