How European Crypto Tax Laws Are Implemented in Practice

Key takeaways

• The new EU tax rules on cryptocurrencies do not introduce new taxes, but expand tax transparency by ensuring that crypto transactions are reported and shared between member states.

• Reporting obligations fall primarily on crypto-asset service providers, requiring them to collect user identity information, tax residency details and transaction data in a standardized format.

• Information reported by the platforms will be automatically exchanged between EU tax authorities, reducing cross-border reporting gaps for cryptocurrency users.

• The framework aligns with the Organization for Economic Co-operation and Development’s global crypto reporting standard, increasing compatibility with non-EU jurisdictions.

The European Union is preparing to significantly strengthen its monitoring of cryptocurrency transactions for tax purposes. Starting January 1, 2026, updated reporting obligations require crypto platforms operating in the EU or serving EU users to provide tax authorities with detailed information about users and their transactions. This shift more closely aligns digital assets with long-established transparency requirements in conventional finance.

The key legislation driving this change is Council Directive (EU) 2023/2226, commonly known as DAC8. It extends the existing EU framework for the automatic exchange of tax information to include crypto assets. Combined with the Markets in Crypto-Assets (MiCA) regulation, DAC8 represents a major step in regulating the crypto sector. It focuses specifically on taxation rather than just business behavior or licensing.

This article explains how the new European cryptocurrency tax reporting system works, outlines the platforms’ obligations, and examines the implications for individual users as the rules come into force.

Why DAC8 is being introduced: Bridging the gap between banks and blockchains

For more than a decade, EU countries have used the Administrative Cooperation Directive (ADC) to automatically share tax-related financial data across borders. Previous iterations covered bank accounts, investment income and certain digital platforms, but crypto transactions were largely exempt from routine reporting.

As the adoption of cryptocurrencies has grown in Europe, this exemption has created obvious loopholes for potential tax evasion. EU authorities considered it inconsistent to exempt cryptography solely because of its technological basis.

DAC8 aims to fill this gap by formally incorporating crypto assets into the tax transparency system, ensuring that transaction data is collected, reported and exchanged in a manner similar to traditional financial information. The European Commission has emphasized that cryptocurrencies do not deserve any special exemption from tax enforcement.

Alignment with the OECD Crypto-Asset Reporting Framework (CARF)

The EU built DAC8 around CARF, launching in 2023. CARF sets a global benchmark for crypto transaction reporting by specifying:

• Which crypto assets are eligible for reporting

• Which entities must report

• The specific user and transaction details required.

By adopting the CARF model, the EU promotes consistency with international standards, making it easier to share data with third countries that implement similar rules.

Did you know? Before crypto-specific rules, several EU tax authorities relied on blockchain analytics companies instead of formal reporting to estimate crypto activity, often producing vastly different figures for the same market.

DAC8 scope: assets and platforms covered

DAC8 focuses on crypto-asset service providers (CASPs) operating in the EU. These include centralized exchanges, brokers, custodial wallets and similar intermediaries. The rules cover a wide range of assets, including most cryptocurrencies, stablecoins, tokenized assets, and some non-fungible tokens that function more as investment vehicles than pure collectibles. The emphasis is on the transferability and use of investments rather than specific labels.

Obligations extend beyond EU-based platforms. Non-EU providers serving EU users may also have to comply, underscoring the extraterritorial impact of the directive.

Timetable and implementation of DAC8

Adopted in October 2023, DAC8 required transposition into national law by December 31, 2025, with enforcement starting on January 1, 2026. In early 2026, some member states faced delays or infringement notices for incomplete transposition, although the EU expected full implementation.

Key dates include:

• The platforms started collecting relevant data on January 1, 2026.

• The first reports, covering 2026 activity, will be submitted to national tax authorities in 2027, usually within nine months of the end of the year.

• The tax authorities then automatically exchange the data every year with other EU countries.

The commission said it expects full and timely implementation. Several countries have received formal notices for delays in transposing the rules, emphasizing that their application will not be optional.

Did you know? Early versions of EU crypto tax proposals debated whether self-custody wallets could one day be reported on, underscoring how difficult it is to regulate decentralized ownership.

Reporting requirements for platforms in DAC8

Under DAC8, PSAPs are required to carry out enhanced due diligence and submit detailed information to their local tax authority. This includes user details such as full name, address, tax residence and tax identification number (TIN), if available.

Transaction data includes:

• Types of crypto transactions, such as sales, exchanges, and transfers

• Gross proceeds from sales

• Transaction dates and values.

After collection, this information is automatically shared between EU tax authorities. A user’s country of residence receives the relevant data even if the platform is located in another country.

For platforms, DAC8 makes crypto tax reporting a structured and recurring compliance obligation. This is more like financial information than timely information.

Impact of DAC8 on crypto users

One of the most important changes for crypto users is the increased transparency of tax reporting under DAC8. National tax authorities can now view transactions carried out on reporting platforms.

This can result in:

• Requests for more detailed tax residency or identification information during account setup or updates

• Better ability for authorities to match crypto activity to income reported on tax returns

• Easier detection of inconsistencies between declared data and tax returns.

DAC8 does not introduce new taxes or standardize rates across the EU. Member states retain authority over cryptocurrency taxation policies, as the directive only focuses on the exchange of information. Although DAC8 automates data exchange between authorities, users are still required to report their crypto activity via their respective national tax returns.

Compliance challenges for platforms under DAC8

Implementing DAC8 requires significant upgrades, including accurate transaction tracking, tax residency verification, and secure data storage. Smaller or less resourced providers may struggle to meet these obligations alongside MiCA and anti-money laundering requirements.

Failure to comply carries the risk of sanctions, including fines for late, incomplete or missing reports. Some platforms have indicated that regulatory compliance costs may influence where they choose to operate.

Users may also face some confusion in understanding DAC8 in the context of MiCA. DAC8 addresses behind-the-scenes tax transparency, while MiCA covers licensing, investor safeguards and market conduct.

The two are complementary: DAC8 ensures the flow of tax data once the services are active, while MiCA defines the authorized operations. Together, they create a comprehensive monitoring framework for the crypto economy.

Some aspects remain unclear under DAC8, such as how decentralized finance (DeFi) fits in when there is no central intermediary to report to. Privacy advocates have raised concerns about mass data collection and sharing, even as EU officials note that the General Data Protection Regulation (GDPR) and other data protection laws continue to apply. It remains to be seen how these safeguards will work in practice.

Did you know? Similar crypto tax reporting models are being explored in Asia Pacific and Latin America, suggesting that EU-style transparency could become a global norm rather than a regional exception.

DAC8 in a broader context

DAC8 is part of a global trend as crypto integrates into traditional finance. Governments around the world increasingly view it as part of the traditional financial system rather than a shadow economy viewed with suspicion.

By adopting standards aligned with those of the OECD and allowing cross-border exchanges, the EU emphasizes that cryptocurrencies will face the same transparency requirements as traditional assets. For users and platforms in Europe, the period of limited formal tax oversight is effectively coming to an end.