This article is more than six months old

New EU rules require crypto firms to share customers’ tax data with authorities

New EU rules require crypto firms to share customers’ tax data with authorities
Regulation
Nadia Calviño, Spain's Minister for the Economy and Digital Transformation, chaired a meeting that approved sweeping new crypto rules. Credit: Frederic Sierakowski
  • Directive covers staking and may cloud regulatory picture for crypto firms.
  • EU move prompted by G20's push implement new cross-border rules to fight illicit finance.
  • Young crypto firms may have a hard time complying.

Beginning in 2026, crypto firms in Europe must provide their account holders’ financial details to tax authorities as part of an effort to crack down on tax evasion.

The European Union’s 27 finance ministers on Tuesday unanimously approved rules that will sweep crypto assets into the bloc’s existing framework for exchanging data between tax authorities.

As a result, crypto service providers, such as digital wallets and exchanges, will have to provide user information to government regulators.

The idea is this move will also help track criminal funds denominated in cryptocurrencies when they cross borders.

Combatting terror finance

“I hope that through this we can avoid the sort of bubbles we’ve seen before and will contribute to financial stability and also combat the financing of terrorism and a combat money laundering,” said Nadia Calviño, Spain’s minister for the economy and digital transformation, in comments to Europe’s Economic and Financial Affairs Council.

The directive, known as DAC8, may cloud the regulatory clarity set by the EU’s landmark legislation, MiCA.

The problem: it covers staking, the practice of providing digital assets to validators who tend blockchains, which has been left out of MiCA. Staking for Ethereum, Solana, and other blockchain networks has become a huge new source of revenue in crypto.

Some crypto service providers are worried the European Union is creating a harsh and stricter environment for crypto in the compared to the rest of the world, said Max Bernt, chief legal officer at crypto tax solutions firm, Blockpit, and a board member of the International Association for Trusted Blockchain Applications.

Join the community to get our latest stories and updates

The crypto industry has ramped up efforts to manage money-laundering, sanctions, and user identification rules, which overshadow tax reporting rules, Bernt told DL News.

“But no one really knows about tax and its impact on the reporting obligations of service providers,” Bernt said. “The DAC8 will have a big impact on service providers, which they are not very aware of yet, because it’s not widely known.”

‘Implementation could be difficult, especially for those with tighter budgets.’

—  Max Bernt, Blockpit

The European Union is responding to a global push to set the crypto tax reporting regime in place.

At the G20 summit in September, leaders of the world’s 20 largest economies agreed that the framework recommended by the Organisation for Economic Co-operation and Development should be implemented by 2027.

The OECD, which sets policies across its 38 participant countries, developed a crypto asset reporting framework that was published in 2022 at the G20′s request.

Europe is ahead of schedule. The next step is publishing the crypto tax reporting directive in the EU’s Official Journal. Then, rules will apply on January 1, 2026.

Staking and MiCA

One big concern for Europe’s digital finance experts: they must also provide authorities with information about clients engaged in staking and crypto lending.

That’s because staking and lending were not included in the European Union’s comprehensive crypto rulebook, known as MiCA. And staking has not been defined on an EU level.

Lawmakers in the European Parliament wanted to remove staking from the reporting equation. But the European Council, which calls the shots on anything tax-related, ignored the suggestion.

“Without further guidance on its interpretation could lead to substantial differences in interpretation within the EU,” said Bernt.

The lack of clear definition could “significantly complicate the bureaucratic hurdles for cross-border transactions,” Bernt said.

That’s because EU directives, unlike regulations, leave it up to nations to decide how they want to reach the results. The matter of taxation itself remains up to every country to decide.

Implementation challenge

“Implementation could be difficult, especially for those with tighter budgets,” said Bernt.

That leaves firms offering Europeans crypto services a few options, according to Bernt. For example, firms can find capacity to deliver the reporting obligations internally, or outsource the work.

Another option could be to seek external guidance and monitoring to build up capacity to later do so independently.

For an industry that is still maturing, firms should not need to face “surprising, unclear, excessive or practically unimplementable reporting requirements,” according to Bernt.

“DAC8 tries to find the right balance,” Bernt told DL News. “Is it perfect? No, but certainly a good start towards achieving greater tax transparency.”

Inbar Preiss is DL News’ Brussels-based regulation correspondent. Contact her at inbar@dlnews.com.

Related Topics