EU’s DAC8 tightens crypto reporting while DeFi stays beyond reach for now

EU DAC8 implements a CARF-consistent reporting regime that will obligate exchanges and custodial services to collect standardized customer identifiers and supply aggregated transaction records to tax authorities, with operational exchange of data scheduled to begin in 2026. The rule intentionally targets identifiable intermediaries because enforcement and large-scale data exchange are feasible where a legal operator exists; by contrast, permissionless DeFi protocols generally lack the intermediary structure that triggers current tax-reporting duties. That leaves a temporary visibility gap for on-chain activity, but coordinated standard-setting from the OECD and FATF — and ongoing FATF work to classify virtual asset service providers (VASPs) — is narrowing the legal and technical options for sustained exemptions. At the same time, Europe’s Markets in Crypto‑Assets (MiCA) rollout is converting high-level policy into concrete authorizations, disclosure duties and cross-border licensing that make the EU a predictable — if higher-cost — regulatory environment for crypto firms. MiCA’s staged timetables and a single-license passporting incentive will encourage firms to domicile in member states that offer efficient authorization pathways, which amplifies the incentive to centralize certain services or to consolidate with licensed operators to meet reporting demands. Outside the EU, jurisdictions present a patchwork of approaches: the United States remains mired in overlapping agency roles and unresolved legislative clarity, while international hubs such as Hong Kong publicly support CARF-style transparency but are asking for implementation mitigations — for example, capped penalties, safe-harbour provisions for good-faith compliance, privacy safeguards and mechanisms to transfer record-keeping when operators exit the market. Those practical requests underline that operational burdens and director-level liability concerns could chill smaller providers if left unaddressed. Implementation data show wide variation: many jurisdictions are still refining VASP criteria for DeFi, only a subset have cataloged or licensed DeFi entities, and initial CARF adoption timelines point to phased data exchanges from 2027 onwards in participating states. Practically, centralized platforms face an immediate compliance shock: upgrades to onboarding, data architecture and cross-border reporting processes will be necessary and will favour larger operators able to amortize costs. For DeFi builders and users, the current perimeter protects much on‑chain activity today, but the convergence of tax and AML workstreams plus regional licensing regimes makes that gap likely to shrink over time — either through governance and custody models that fit reporting frameworks or by regulators expanding tools to reach protocol-level activity. The resulting dynamic is a tug-of-war between privacy- and permission-preserving design and regulatory regimes seeking auditable tax records; how jurisdictions balance enforcement, penalty design and data-protection safeguards will determine whether markets professionalize without undue attrition among smaller participants.