UK Crypto Firms Face Fines for Non-Compliance with HMRC’s New Reporting Rules
UK cryptocurrency businesses now operate under tightened scrutiny—HMRC slams new reporting mandates requiring detailed user data disclosures. Fail to comply? Brace for punitive fines that could make even a degen trader wince.
Taxman sharpens claws: The rules target exchanges, wallets, and DeFi platforms, demanding transaction histories and identity verification. No more ’anonymous’ loopholes—Big Brother meets blockchain.
Industry backlash simmers as firms scramble to retrofit compliance systems. One exec muttered about ’innovation-stifling bureaucracy’—because nothing screams progress like paperwork.
Closing jab: At least HMRC moves faster than Bitcoin transactions during network congestion.
Crypto entities to submit KYC information and transaction data to authorities
Meanwhile, the framework means crypto service providers have to collect the personal data of their users. Most centralized exchanges already collect this data, which includes name, date of birth, address, and country of residence.
Additionally, crypto firms must get national insurance or unique taxpayer references for UK residents and tax identification numbers for non-UK residents. Companies may also be required to give information about a controlling person.
Additionally, crypto entities also need to collect data about transactions, including their value, the crypto asset, and the type of transaction. With all this information, the regulator can connect each taxpayer to an account.
Entities are expected to conduct due diligence on the information they obtain and could face up to £300 in penalties per user when they submit inaccurate, unverified, or incomplete data. Failure to report or late reporting could also attract similar sanctions.
Interestingly, Crypto UK, the country’s leading trade association for crypto assets, has praised the move. In a post, it stated that HMRC developed the guidance based on industry input, and it is a step towards a regulated ecosystem.
Surveillance of crypto transactions is increasing globally
Meanwhile, the new framework is not peculiar to the UK. In fact, more than 60 countries, including the US, Australia, Canada, South Africa, and many of the major European countries, have all committed to implementing the CARF domestically. The framework is expected to enable international cooperation between countries on crypto transactions.
While a key reason for the reporting is to tackle the use of crypto for illicit purposes and allow proper taxation of crypto assets, it also highlights increasing surveillance of crypto activity globally.
The EU recently announced plans to introduce new anti-money laundering measures prohibiting crypto entities from dealing with anonymous wallets and privacy coins. The new rules require verification for transactions over €1,000.
While privacy coins have long faced scrutiny, the proposal to ban anonymous crypto accounts has been questioned, given that all crypto addresses are anonymous by default. However, many believe the rules will only apply to centralized exchanges and that non-custodial wallets will not be impacted.
Still, the increase in crypto transaction surveillance remains a concern for privacy experts and crypto stakeholders who believe it could hinder innovation.
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