UK to Require Domestic Crypto Reporting from 2026 under CARF, Adds DeFi ’No Gain No Loss’ Proposal
The UK will expand the OECD-designed Cryptoasset Reporting Framework (CARF) to require domestic crypto platforms to report all transactions by UK-resident users from 2026. The change closes a previous visibility gap by bringing purely onshore buys, sells and transfers into HMRC’s automated reporting scope ahead of CARF’s first global exchange in 2027. Platforms must carry out KYC, value holdings in fiat, perform due diligence and submit annual transaction reports; penalties for non-compliance may include fines and sanctions. HMRC estimates UK crypto holdings exceeded £10 billion in 2024. Concurrently, the government has proposed a DeFi “no gain, no loss” tax rule that defers capital gains until tokens are disposed, aiming to reduce reporting burdens for DeFi users. The move follows wider global tax-tightening trends — OECD adoption of CARF, South Korea’s stepped-up enforcement, Spain’s proposed higher crypto tax rates, and phased CARF implementation in Switzerland — and is expected to raise platform compliance costs (industry estimates ~15–20%), increase on-chain/off‑chain traceability for tax authorities, and prompt operational consolidation among exchanges. For traders: expect stricter KYC, improved data availability for HMRC, clearer tax treatment for DeFi activity, potential short-term impacts on trading volume and custodial behaviour, and reduced likelihood of large undisclosed holdings escaping scrutiny.
Neutral
This policy is unlikely to directly move crypto prices in a clear bullish or bearish direction. It increases regulatory transparency and compliance costs for platforms, which could reduce short-term liquidity or volume as platforms adjust and pass on costs, exerting modest downward pressure. However, clearer tax rules — including the proposed DeFi ’no gain, no loss’ deferral — reduce long-term regulatory uncertainty, supporting market confidence and institutional participation. Enhanced reporting raises enforcement risk for undeclared holdings, which could trigger short-term portfolio adjustments, but over time the market should adapt. Overall the net effect is neutral: short-term frictions versus longer-term clarity and market maturation.