The UK has been actively reforming its approach to cryptocurrencies via HM Revenue and Customs (HMRC). A new regulatory initiative has been introduced, prompted by the adoption of the OECD’s Cryptoasset Reporting Framework (CARF). Effective January 1, 2026, all crypto firms must collect and disclose comprehensive user and transaction data.

“From January 1, 2026, if you provide cryptoasset services in the UK, you’ll bear new responsibilities for gathering data and reporting it to HMRC,” the announcement on May 14, 2025, states.

All cryptoasset service providers, whether domestic or international, who serve UK clients, will need to gather extensive data about each user and transaction, including but not limited to addresses, countries of residence, national insurance numbers, and unique taxpayer references.

Hefty Penalty for Non-Compliance

Failure to adhere to these new regulations or submitting inaccurate data will result in severe penalties. HMRC has stipulated potential fines of up to £300 per user for misreporting, a total that could amplify for businesses with larger user bases.

The UK government aims to enhance tax compliance and address illicit activities. Companies must report various details such as transaction values and the types of cryptoassets involved.

UK Decides to Align with US Rather than EU Over Crypto Regulation

In an effort to maintain its competitiveness in the global fintech space, the UK has announced new draft regulations for the crypto sector. On April 29, 2025, Finance Minister Rachel Reeves stated, “Through our Plan for Change, we are making Britain the best place in the world to innovate – and the safest place for consumers. Robust rules surrounding crypto will enhance investor confidence and support fintech growth while protecting individuals throughout the UK.”

The government is instituting mandatory regulations for crypto exchanges, dealers, and agents, aligning its approach with the US model, which categorizes crypto assets as securities, marking a shift away from the EU’s Markets in Crypto-Assets (MiCA) framework that became effective in December 2024.

The UK anticipates finalizing the legislation by the conclusion of 2025.