Why crypto tax reporting now hinges on knowing your customer

<a href="https://xpertsstudio.com/the-wrong-question-about-crypto-platform-risk/” title=”The Wrong Question About Crypto Platform Risk”>Crypto platforms are discovering that tax transparency starts long before a report ever reaches a regulator’s desk.

The OECD’s Crypto-Asset Reporting Framework (CARF) was designed to bring greater tax transparency to cryptoassets by requiring relevant service providers to collect and report tax-related information about their users and transactions. The UK adopted CARF from 1 January 2026, with the first international exchanges of information due in 2027.

For crypto exchanges and other affected providers, identity verification specialist <a href="https://www.identomat.com/blog/crypto-tax-reporting-is-changing-what-carf-means-for-crypto-platforms" rel="nofollow noopener” target=”_blank”>Identomat notes that this creates a challenge that extends well beyond producing an annual report.

Under the UK regime, Reporting Cryptoasset Service Providers must carry out due diligence and report relevant transactional information to HMRC each year. That means platforms need systems capable of linking transactions to identifiable, reportable customers, using data such as name, address, date of birth, tax residence and tax identification number. According to Identomat, the compliance obligation therefore begins with customer data collection and verification, not with the report itself.

This is proving harder than it sounds for platforms with large, established user bases. Accounts may have been opened at different points in the industry’s development, under varying onboarding standards. Some customers gave limited information at signup; others have since relocated, changed tax residence, or simply left records outdated.

Identomat argues this turns CARF into a customer remediation exercise as much as a reporting one, with existing users potentially needing to confirm tax residence or supply missing details before their records can be used with confidence.

Establishing tax residence is central to the framework, since CARF depends on the exchange of tax-relevant information between participating jurisdictions, and HMRC guidance requires providers to determine whether users are reportable. For platforms operating across borders, identity, address and tax information cannot sit as disconnected data points; they need to form one reliable customer record.

Identomat positions identity verification as foundational to this process rather than a substitute for tax systems themselves. Its platform combines identity verification, liveness checks, address verification, KYC questionnaires and AML screening within configurable workflows, allowing new customers to complete verification alongside additional data requests, while existing verified customers are asked only for what’s missing.

For corporate customers, KYB processes can capture details on the business, its representatives and beneficial owners, helping platforms update older records without forcing every user through a full re-onboarding journey.

Identomat’s broader point is that regulatory reporting is only as reliable as the customer data underpinning it. Strong transaction records mean little if they cannot be confidently tied to the right customer and tax residence. As tax authorities gain sharper visibility into crypto activity, platforms will need customer-data infrastructure that works continuously, not just at year-end.

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Source: fintech.global