Crypto Exchanges Face Challenge in Verifying Customer Identities Under New UK Tax Framework

The OECD's Crypto-Asset Reporting Framework (CARF) requires crypto exchanges and other affected providers to collect and report tax-related information about their users and transactions. In the UK, this began on January 1, 2026, with the first international exchanges of information due in 2027.

Reporting Cryptoasset Service Providers must carry out due diligence and report relevant transactional information to HMRC each year. This 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.

Crypto exchanges with large user bases are facing a challenge in verifying customer identities, particularly those who gave limited information at signup or have since relocated. Establishing tax residence is central to the framework, as CARF depends on the exchange of tax-relevant information between participating jurisdictions.

Identity verification specialist Identomat notes 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.