DAC 8 and CARF: the cornerstones of tax transparency in the European crypto market – an interview with CoinTracking

Impact of DAC 8 on the European market and relevance for global competitiveness

Welcome, Malte, let’s start with the first question. Do you think that DAC 8 and CARF should be seen more as an opportunity or a burden for the European crypto industry?

Basically, I see it from two perspectives:

On the one hand, DAC 8 in conjunction with CARF can be seen as an opportunity because it creates regulatory clarity and gives conservative and institutional investors in particular more confidence in the crypto market.

Regardless of whether their previous skepticism was justified or not, regulation provides greater certainty and acceptance. This could stimulate growth in the sector by encouraging new players who were previously reluctant to enter the market. Established companies that already have the necessary resources could benefit from these regulations by gaining new customers and strengthen their market position over the long term.

On the other hand, the new requirements represent a heavy burden, especially for start-ups and smaller companies. Complying with them requires considerable financial and human resources. From discussions with industry representatives, I know that the annual compliance costs alone for managing the currently emerging regulatory requirements such as MiCAR and DAC 8 can quickly reach a high six-figure range. This can pose an existential challenge for young companies.

It also puts them at a competitive disadvantage compared to markets with less stringent regulations. While European companies bear high regulatory costs, competitors in other regions may be able to invest these funds in innovation and growth.

In a nutshell, I would say: for large, established companies, the regulation may be more of an opportunity, as they have the means to meet the requirements while at the same time expanding their customer base. Small and start-up companies, however, may find it to be a considerable burden, making their market entry phase more difficult.

Challenges in implementing DAC 8 and CARF

What specific challenges do you see in the practical implementation of DAC 8 and CARF?

A key issue is the collection and processing of data. Until now, users have been responsible for disclosing tax-relevant transactions themselves. The new regulations, however, require central platforms and exchanges to transmit this data directly to the authorities. This will make it easier for tax authorities to verify investors’ tax obligations and prevent potential tax losses.

There is, however, a significant gap: cryptocurrencies can also be traded in a decentralized manner, for example through self-custodied wallets or decentralized exchanges (DEXs). These are not subject to the new reporting obligations, meaning that the users themselves remain responsible for making the correct tax declarations. This leaves part of the market outside the direct control of the authorities.

In addition, tax authorities must first build the technical and professional capacity to be able to analyze the vast amounts of data from centralized platforms in a meaningful way. Unlike in the traditional financial world, where securities transactions can usually be traced in a linear fashion, crypto transactions are often complex. Users might move assets from one exchange to a wallet, then to another exchange and finally through decentralized channels. The challenge for authorities is to decipher and properly assess these transaction chains.

Implementation also requires considerable adjustments for companies. Crypto exchanges, wallet providers and other asset service providers will need to enhance their compliance processes, set up data transfer systems and meet privacy requirements all at the same time.

Regarding the transparency requirements for customer data, this should be a relatively straightforward exercise for banks, as they already have all the relevant information about their customers. For crypto exchanges, however, things can get more complicated, a variety of transaction types and trading models must be considered. While the classic buying and selling of Bitcoin is still relatively easy to track, complex trading strategies or staking models may require additional data processing.

In your opinion, are there any loopholes in the regulations that could be exploited?

Yes, there are definitely loopholes in the regulations, especially regarding decentralized financial activities and self-custody. The reporting requirements only cover data provided by centralized entities such as banks and exchanges. However, those who use their own wallets, trade exclusively on decentralized exchanges or conduct peer-to-peer transactions can largely circumvent regulation. While there are analytics companies that attempt to track such transactions, especially if a wallet has interacted with a KYC platform at some point, it is time-consuming and not universally applicable.

Another critical issue is foreign platforms that serve European users but do not necessarily implement the rules. This raises the question of how much power the EU actually has to force companies based on offshore islands or in other non-cooperative jurisdictions to comply. High penalties at the national level could of course act as a deterrent, but whether and how effectively such penalties can be enforced remains questionable.

Transparent, legally compliant documentation of tax transactions for bank customers

How exactly does CoinTracking’s offering help banks implement the tax information and reporting obligations, particularly regarding to DAC 8 and CARF?

In particular, with the standalone tax reporting solution, CoinTracking helps banks comply with tax information obligations and DAC 8 and CARF reporting requirements. The platform enables users to import all transactions from multiple exchanges, wallets, and blockchains, consolidate them, and process them correctly for tax purposes. The cost base is automatically determined, the tax rules of the country are applied and a tax report is generated. With the tax report solution, banks can offer their customers a simple tool to create tax reports. The bank transmits only anonymized transaction data to CoinTracking, never personal information. CoinTracking processes this data, calculates the tax-relevant amounts in accordance with the respective tax regulations and transmits the processed data back to the bank. There, it is supplemented with personal customer data, so that users can download the finalized tax report directly through their online banking portal.

With DAC 8, the main change for individual users is awareness of their tax obligations, as exchanges will now send the customer’s transaction data directly to the tax authorities. Many investors are now taking a closer look at the correct taxation of their crypto profits to order to avoid possible queries or audits by the tax authorities. CoinTracking helps by enabling transparent and legally compliant documentation of all tax-related transactions.

Due to a growing awareness of tax obligations, banks and stock exchanges are increasingly recognizing the importance of a user-friendly tax solution. For customers, a key factor in choosing a bank is whether they have to carry out all the tax calculations themselves at the bank or whether they can simply press a button to generate a finished, legally compliant tax report.

What financial services providers should focus on now

From your perspective, what should European financial institutions focus on now in order to optimally prepare for the first-time application of the reporting obligations from January 1, 2026?

European financial institutions should familiarize themselves with the new reporting requirements early on to adapt their IT and compliance processes and train their employees accordingly. The implementation of these regulations requires thorough preparation, whether through the establishment of internal structures or the involvement of external experts. Those who address the requirements of DAC 8 and CARF early can ensure that all systems are up and running by the January 1, 2026, deadline.

In addition to technical and regulatory implementation, however, communication with your own customers should not be neglected. In the crypto sector in particular, many users value their privacy, and tax issues are often associated with uncertainty. Transparent and comprehensible communication can build trust. If customers are informed early on and know that their bank offers a simple and reliable tax solution, this reduces potential concerns. By being proactive, banks can not only protect themselves from regulatory scrutiny, but also build long-term customer loyalty.