HMRC's Plan to Track Every UK Crypto Trade Could Be the End of Crypto Privacy

The UK government has begun to regulate digital currencies as part of its wider efforts to increase oversight of the industry. From 1 January 2026, all British residents engaging in cryptocurrency transactions will be required to provide detailed account information—including names and addresses—to HM Revenue and Customs (HMRC). The UK's tax authority is treating crypto exchanges similarly to banks, mandating that they report all trading activity carried out by their customers.

Crypto Enters the Same Reporting System as Banks

With the introduction of the Crypto Asset Reporting Framework (CARF), cryptocurrency transactions will now be subject to rigorous scrutiny on an international level, much like traditional bank accounts. Crypto exchanges will be obliged to report their customers' gains and losses to HMRC in a timely and accurate manner. This effectively creates an environment where every transaction is tracked against individual users, eroding the privacy once associated with crypto trading.

Historically, the crypto industry has marketed itself around decentralisation and privacy, emphasising user control over assets and transactions. However, these new reporting obligations mean that exchanges failing to comply with CARF could face penalties. Such non-compliance may lead to fines, compelling them to enforce strict record-keeping procedures on their customers. As a result, the era of anonymous or private crypto trading in the UK appears to be coming to an end.

Tax Liability Hits Crypto Gains Hard

The impact on investors is immediate. Bitcoin, often regarded as the industry's flagship asset and a key indicator of overall market sentiment, has experienced significant value fluctuations this year. From an early 2025 valuation of nearly $93,500 (£69,500), Bitcoin's price peaked at just under $124,500 before falling again below $90,000. For those who bought Bitcoin at lower prices and sold at recent peaks, this could translate into substantial taxable gains, with HMRC eager to ensure these profits are taxed accordingly.

Voluntary Disclosure for Past Gains

HMRC is also encouraging taxpayers to voluntarily disclose any unpaid taxes related to previous years' crypto gains. The Voluntary Disclosure Facility (VDF) allows individuals to correct past filings by declaring assets or gains earned before April 2024. This process can help mitigate penalties and allow taxpayers to settle outstanding liabilities.

Taxpayers who realised crypto-derived earnings in the financial year ending 2025 must include these gains in their self-assessment tax returns due by 31 January of the following year. Incorporating this information into self-assessments enables HMRC to verify that all profits have been declared, thereby helping to recover potentially lost tax revenue.

Broader Crypto Regulation Under Consultation

Meanwhile, the Financial Conduct Authority (FCA) has launched a public consultation, open until 12 February, on proposed new crypto regulations. These include stricter oversight of exchanges and brokers, development of responsible regulation frameworks, and measures to ensure appropriate credit and interest rates for borrowing and lending activities.

The UK aims to find a balance between investor protection and supporting industry growth. These proposed regulations could curb reckless speculative activity while fostering wider adoption of cryptocurrencies within a secure and regulated environment.

The End of Crypto Privacy in the UK

This shift in regulation may also influence international standards, as many countries are expected to implement similar legislation to facilitate cross-border information sharing among tax authorities. For UK investors, the era of private crypto gains appears to be over; compliance with tax laws will no longer be optional. Crypto transactions will be fully transparent, with governments gaining unprecedented access to individual trading data, marking a significant turning point for privacy and decentralisation in the space.