Faced with the complexity of implementing MiCA regulation, companies in the cryptocurrency sector within the European Union (EU) are already under great pressure. Their compliance services are constantly called upon to ensure increased vigilance. Faced with this context, the EU has just approved a new system called DAC8 aimed at strengthening tax surveillance of crypto transactions.
The DAC8, a new instrument to strengthen the tax supervision of cryptocurrencies
After the MiCA, it is now the DAC8 which is impacting the crypto-asset sector. Thanks to this system, digital asset service providers (PSANs) will now have to report all cryptocurrency transactions. Furthermore, the tax services of EU member countries will also have to establish an automatic exchange of information.
This new obligation follows the European Commission’s proposal of December 8, 2022. This aims to establish a framework for reporting transactions carried out by EU customers with PSANs. The objective is to firstly allow tax authorities to monitor crypto-asset exchanges. Then, they must also monitor the income obtained in order to reduce the risks of fraud and tax evasion.
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European Parliament overwhelmingly approves DAC8
Unsurprisingly, the registration chamber called the European Parliament unanimously approved the Commission’s proposal. During a plenary session held in Strasbourg on September 13, 2023, MEPs voted in favor of DAC8 by 535 votes.
Parliamentarians are therefore above all concerned not to miss the slightest cent of tax revenue. And for this, they are ready, if necessary, to encroach on the privacy of cryptocurrency users. For this reason, companies in the sector will also need to adapt their compliance services. Thus, they will be able to survive under the watchful eye of the European “Big Brother”.
The impact of DAC8 on businesses in the cryptocurrency sector
For crypto-asset market players, strengthening tax supervision implies an additional burden in terms of compliance:
- Implementation of systems for monitoring and controlling transactions carried out by European customers
- Regular reporting of transactions to local tax authorities
- Participation in the automatic exchange of information between tax services of EU member countries
It is essential for players in this sector to comply with the new requirements imposed by DAC8. This way, they will be able to avoid sanctions and financial penalties.
A questioning of the confidentiality of crypto transactions
The implementation of DAC8 also raises privacy concerns for cryptocurrency users. Indeed, increased monitoring of transactions by tax authorities could be perceived as an attack on data confidentiality.
However, it is important to remember that the strengthening of tax surveillance aims above all to fight against fraud and tax evasion. These practices are known to harm public finances and fairness among taxpayers.
A necessary balance between respect for private life and the fight against tax fraud
To ensure healthy and regulated functioning of the crypto-asset market within the EU, it is necessary to find a happy medium. The one that separates the protection of users’ personal data and the need to have a solid tax framework to effectively combat abuse.
Companies in the sector must therefore redouble their efforts to adapt their service offering and their compliance with the new regulatory requirements imposed by DAC8. Thus, they will actively participate in building a reliable and transparent ecosystem for investors in cryptocurrencies.
