In the spring of 2024, the European Union (EU) adopted a new package of anti-money laundering (AML) regulations, establishing a new authority in Frankfurt—the Anti-Money Laundering Authority(AMLA)—to coordinate EU-AML efforts and specifically address challenges related to the illicit use of crypto assets.Around the same time, the Organization for Economic Development and Cooperation (OECD) introduced the Crypto Asset Reporting Framework (CARF) to combat crypto-related tax evasion and fraud. CARF builds on the Common Reporting Standards (CRS) and will take effect in 2026, with the EU implementing it through DAC8.
These initiatives aim to create a unified framework for crypto compliance while enhancing transparency and oversight. Over the past six years, nearly $100 billion in funds have been transferred from illicit wallets to conversion services, according to Chainalysis. While it’s a positive development that governments are taking action, the new regulations present significant challenges for enterprises, which risk penalties, loss of banking relationships, and exclusion from key markets if they fail to comply.
The road to transparency
Many industry players mistakenly assume that CARF is focused on crypto taxation, but it is actually an information reporting framework more closely aligned with AML rules. To date, 66 governments have signed on, not just to access data on residents’ crypto activities, but also to maintain a strong presence in global regulatory discussions. CARF mandates automatic tax-relevant information exchange among participating jurisdictions, ensuring governments have visibility into crypto trading activities regardless of location.
CARF and AML regulations are interlinked, but tax authorities are often less prepared than financial crime units to handle the incoming wave of data. Crypto assets, by nature, operate across borders, and the average user relies on multiple exchanges. Without a robust information reporting framework, enforcement will be nearly impossible.
Additionally, many large exchanges are based in small jurisdictions. In the EU, Austria, for example, will receive a disproportionately high volume of crypto reports compared to its population, making proactive compliance efforts crucial for both enterprises and governments.
Best compliance practices for enterprises
To prepare for upcoming regulations, enterprises must implement self-certification and monitoring procedures before CARF takes effect on January 1, 2026. This includes collecting tax information for both existing and new users. If customers fail to provide their tax information within 90 days, their accounts must be restricted from transacting, or the enterprise risks financial penalties. To ensure a smooth transition, businesses should proactively notify users that tax IDs will be required, as many currently believe they are exempt from reporting obligations if they do not cash out.
Enterprises must also generate and submit reports to their tax jurisdictions, aggregating transaction data by asset type. Without proper data collection protocols from the outset, companies may be forced into complex and time-consuming backbooking efforts.
To streamline compliance, businesses should invest in technology solutions that facilitate efficient information reporting. Integrated sub-ledger solutions that support collaboration between AML and finance teams will be essential to keeping up with evolving regulations. Additionally, prioritizing automation and scalable reporting solutions will ensure compliance remains manageable as reporting requirements expand.
The bottom line
The regulatory landscape for crypto in the EU and United Kingdom is rapidly evolving with the introduction of AML initiatives and the CARF framework. While these regulations are intended to increase transparency and combat illicit activity, they also introduce substantial compliance obligations for crypto enterprises.
With CARF set to take effect in 2026, businesses must act now to establish robust tax information collection and reporting systems. Failing to do so could result in penalties, operational disruptions, and restricted market access. Investing in automated compliance solutions that integrate AML and tax reporting functions will be crucial for firms looking to remain competitive.
Ultimately, enterprises that proactively adapt to these changes will be best positioned to succeed in the evolving regulatory environment—transforming compliance from a burden into a strategic advantage.
