UK Widens Crypto Reporting Rules to Cover All Domestic Transactions Under CARF Expansion

The United Kingdom is significantly expanding its cryptocurrency oversight framework, announcing that domestic crypto platforms will be required to report all transactions from UK-resident users starting in 2026. The move, detailed in a policy paper released by His Majesty’s Revenue and Customs (HMRC) on November 27, 2025, extends the scope of the Cryptoasset Reporting Framework (CARF) beyond its traditional cross-border focus to capture purely domestic activity for the first time.

TL;DR

• The UK will require domestic crypto platforms to report all transactions from UK-resident users beginning in 2026
• HMRC will gain automatic access to both domestic and cross-border crypto data for the first time
• The expansion prevents crypto from becoming an “off-CRS” asset class that escapes traditional financial visibility
• The UK also proposed a “no gain, no loss” DeFi tax framework on the same day
• The changes align with global CARF implementation ahead of the first information exchange in 2027

From Cross-Border to Comprehensive Coverage

The Cryptoasset Reporting Framework, designed by the Organisation for Economic Co-operation and Development (OECD), was originally conceived as a mechanism for the automatic cross-border exchange of cryptocurrency transaction data between tax authorities worldwide. Under CARF, crypto asset service providers are required to perform due diligence procedures, verify user identities, and report detailed transaction information on an annual basis to their local tax authorities, who then share that data internationally.

However, a significant limitation existed in the original framework. Because CARF primarily targeted cross-border activity, cryptocurrency transactions occurring entirely within the United Kingdom fell outside the automatic reporting channels. This created an asymmetry where traditional financial accounts were subject to comprehensive reporting under the Common Reporting Standard (CRS), while domestic crypto transactions operated in a relative blind spot for tax authorities.

Preventing the Off-CRS Loophole

The UK government’s decision to expand CARF to cover domestic users directly addresses this gap. According to the HMRC policy paper, the expansion aims to prevent cryptocurrency from becoming an “off-CRS” asset class — one that escapes the visibility and reporting requirements applied to traditional financial accounts under the Common Reporting Standard.

Under the new rules, UK-based crypto platforms will be required to collect and report comprehensive transaction data for all users, regardless of whether the counterparty is domestic or international. This unified approach is designed to streamline reporting obligations for crypto companies while giving tax authorities a more complete dataset to identify noncompliance and assess taxpayer obligations.

The timing is strategic. CARF’s first global information exchange is scheduled for 2027, and the UK is positioning itself to have full domestic coverage in place well before that deadline. By bringing domestic transactions under the CARF umbrella now, HMRC ensures that when the international data-sharing mechanism goes live, it will have a comprehensive view of UK residents’ crypto activity from day one.

The No Gain, No Loss DeFi Proposal

On the same day as the CARF expansion announcement, the UK also proposed a groundbreaking tax framework for decentralized finance (DeFi) users. The “no gain, no loss” approach would defer capital gains liabilities for users who deposit tokens into crypto lending platforms and liquidity pools, taxing them only when they ultimately sell or dispose of the underlying tokens.

This dual announcement reflects a sophisticated regulatory strategy: tightening oversight where needed through CARF expansion while simultaneously reducing friction for legitimate DeFi activity through sensible tax reform. The UK crypto industry has broadly welcomed the DeFi tax proposal, viewing it as a pragmatic recognition that DeFi transactions should not trigger taxable events at every intermediate step.

Global Context of Tightening Tax Oversight

The UK’s moves come amid a global wave of crypto tax and reporting reforms. In South Korea, the National Tax Service announced in October 2025 that it would seize cryptocurrency held in cold wallets and conduct home searches for hardware devices if taxpayers are suspected of hiding digital assets to evade obligations. Spain’s Sumar parliamentary group has proposed raising the top tax rate on crypto gains to 47 percent, which would shift crypto profits into the general income bracket.

Switzerland, meanwhile, announced on the same day as the UK’s CARF expansion that it had postponed the start of automatic crypto information exchange with foreign tax authorities until 2027. While CARF rules will still enter Swiss law on January 1, their actual implementation has been delayed as the country determines which nations it will share data with, with transitional measures planned to ease compliance for domestic crypto firms.

In the United States, Representative Warren Davidson introduced a bill in November that would allow Americans to pay federal taxes in Bitcoin, with the contributions routed into a strategic national BTC reserve. The proposal, known as the Bitcoin for America Act, would exempt these payments from capital gains taxes by treating the transferred Bitcoin as neither a gain nor a loss for the taxpayer.

Implications for Crypto Platforms and Users

For crypto platforms operating in the UK, the expanded reporting requirements will mean significant compliance investments. Companies will need to upgrade their systems to capture, verify, and report all domestic transaction data in a format compatible with CARF standards. The unified approach may ultimately simplify operations by eliminating the distinction between domestic and cross-border reporting, but the transition period will require substantial technical and operational adjustments.

For individual crypto users in the UK, the practical impact is one of increased transparency. Every transaction, no matter how small or whether conducted with a domestic counterparty, will be visible to HMRC. This represents a fundamental shift in the privacy expectations of UK crypto users and underscores the government’s determination to bring digital asset taxation fully into line with traditional financial reporting standards.

As Bitcoin trades around $92,000 and the global crypto market continues to mature, the UK’s twin announcements reflect a broader trend: governments worldwide are no longer content to let crypto operate in regulatory gray zones. The combination of expanded reporting, targeted tax reform, and international coordination through frameworks like CARF signals that the era of crypto tax opacity is drawing to a close.

Why This Matters

The UK is one of the world’s largest financial centers, and its regulatory decisions carry significant weight in shaping global standards. By expanding CARF to cover domestic transactions, the UK is setting a precedent that other jurisdictions are likely to follow. The simultaneous DeFi tax reform shows that regulatory tightening does not have to come at the expense of innovation — it can be paired with sensible rules that reduce unnecessary compliance burdens. For the crypto industry, the message is clear: comprehensive tax reporting is becoming the norm, and platforms that fail to invest in compliance infrastructure will find themselves increasingly marginalized in regulated markets.

Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or tax advice. Cryptocurrency regulations vary by jurisdiction and are subject to change. Readers should consult with qualified tax professionals and legal advisors before making any decisions related to cryptocurrency reporting or taxation.