EU tightening on cryptocurrencies: when activities are reported
The Council of Ministers of the European Union has reached an agreement on the draft DAC8 on administrative cooperation in the field of taxation by amending the existing directive to require automatic reporting and exchange of information (AEOI) on the proceeds of cryptocurrency transactions.
But what exactly changes?
The EU deal on cryptocurrencies
With the intervention of Brussels, in the EU from 2026 crypto-asset service providers will have to conduct procedures of due diligence on customers. And what is due diligence? Due diligence is an investigation, audit or review performed to confirm facts or details of a matter under investigation. In the financial world, due diligence requires a examination of financial documents before entering into a proposed transaction with another party.
Therefore whoever works with cryptocurrencies will have to report to the tax authorities of EU Member States the range of crypto-asset transactions involving clients, including stablecoin transactions, e-money tokens and some non-fungible tokens (here more details on what they are and how they work)
This already happens for conventional asset transactions, but for the new directive regarding online transactions no minimum threshold has been set for the size of transactions to be reported.
The EU squeeze on top incomes
According to the Council, the amended directive is necessary because the decentralized nature of crypto-assets has made it difficult for member states’ tax administrations ensure tax compliance. “The inherent cross-border nature of cryptocurrencies requires strong international administrative cooperation to ensure effective tax collection,” they said from Brussels.
Here, by the way, how to handle cryptocurrencies in your tax return.
The new directive also extends the scope of application of the current rules on exchange of information of fiscal relevanceincluding provisions on the exchange of ruling cross-border quotations concerning wealthy peopleas well as AEOI provisions on non-custodial dividends and similar revenues. According to the Council, in fact, the current provisions do not cover this type of income.
In particular, the proposal aims to:
- improve standards on tax identification number (TIN) reporting and communication to help authorities identify affected taxpayers and their liabilities;
- introduce new sanctions that Member States can impose on persons who fail to comply with national legislation on reporting obligations.
Furthermore, it was approved separately a regulation governing the crypto-asset markets (MiCA)intended to protect investors by increasing transparency and putting in place a framework for issuers and service providers that includes compliance with anti-money laundering rules.
With the new EU directive, the cryptographic operators may soon be responsible for collecting, validating and reporting information relating to crypto-assets and their users.
The aim is to introduce harmonized conditions in the EU that deal with, inter alia, the issuance, the (transaction) function of the intermediary and the trading of crypto-assets. A Crypto-Asset Operator (i.e. a Reporting Crypto-Asset Service Provider) under the DAC8 is any legal entity or business whose occupation or business is the provision of one or more crypto-asset services (for example, the exchange of fiat currency into crypto-assets) to third parties on a professional basis and who is licensed in a member state to provide these services.
Sanctions for those who do not comply with the obligations
The European Commission has clarified that there will be sanctions applicable to violations of the national provisions adopted pursuant to the DAC8 (here, for example, the list of cryptocurrencies that have been declared illegal).
The directive establishes some basic rules which Member States should respect when identifying and establishing their own directives on the matter. For example, in the event of non-compliance with the national provisions adopted to comply with the DAC8, the sanction minimum fine cannot be less than 50,000 euros (scaled on the annual turnover of the reference taxpayer, for example this minimum fine rises to 150,000 euros when revenues exceed 6 million euros).
Hence, Member States will be required to adopt and publish their laws, regulations and administrative provisions necessary for comply with this DAC8 by 31 December 2025 at the latest. This means that DAC8 will enter in effective from 1 January 2026.