Is Europe on the Brink of Cracking Its DeFi Tax Mystery Once and for All?
Ever wonder why the European Union’s latest crypto tax rules seem to have conveniently left decentralized finance (DeFi) off the hook — at least for now? It’s not just an oversight; it’s a calculated move. Governments are zeroing in on what they can actually enforce right away — namely, centralized exchanges and custodians — sidestepping the wild west of DeFi where accountability is murky at best. Colby Mangels, who’s been in the nitty-gritty trenches with the OECD’s Crypto Asset Reporting Framework (CARF), puts it plainly: you don’t start the tax chase by knocking on grandma’s door but by targeting the middlemen turning crypto into a business. With DAC8 rolling in across the EU, this phased and punchy approach is reshaping crypto tax reporting globally, while leaving DeFi in the regulatory shadows — for now. But don’t get too comfy: as AML frameworks and global cooperation tighten, those shadows won’t stay dark forever. Ready to dive into this uneven, evolving landscape where tech meets tax law? LEARN MORE.
The European Union’s new cryptocurrency tax reporting framework is built around what governments can immediately enforce, leaving decentralized finance (DeFi) outside its scope for now.
A former Organization for Economic Co-operation and Development (OECD) official who worked on the Crypto Asset Reporting Framework (CARF) said that this gap is a deliberate focus and not a blind spot.
“It doesn’t make sense to go to your grandma and ask her to give you all the tax reporting on crypto just because you happened to work with her over a certain period,” Colby Mangels, Taxbit’s global head of government solutions and a former OECD adviser, told Cointelegraph. “You really have to go to the intermediaries that are doing this as a business.”
Implemented in the EU under the eighth revision of the Directive on Administrative Cooperation (DAC8), the rules require crypto exchanges and custodians to begin collecting user activity data in 2026. While centralized platforms prepare for new reporting obligations, DeFi is still largely untouched, creating an uneven compliance landscape in the crypto industry.
How global crypto tax reporting is being rebuilt
Crypto tax reporting rules are frequently discussed through a tangle of related acronyms, but they are not interchangeable.
The Common Reporting Standard (CRS) is the OECD’s framework for the automatic exchange of information between tax authorities, implemented in the EU through DAC2. The CRS does not cover most crypto activity, a gap that is being filled by the CARF.
The CARF is the OECD’s crypto tax reporting standard. It sets out who reports, what information is collected and how that data is exchanged between tax authorities. Those committed to data exchanges have started rolling out domestic frameworks such as the EU’s DAC8.
DAC8 is the EU’s first harmonized tax transparency framework that extends cross-border reporting obligations to crypto services. It’s based on the CARF, and member states had a Dec. 31 deadline to adopt the directive into national law. DAC8 essentially aligns EU countries with the CARF, but members can still commit to different timelines at the OECD level.
The EU’s move aligns with the global adoption of the CARF, as dozens of jurisdictions prepare to introduce tax information exchange regimes. Mangels recalled a more analog world around 30 years ago. If a client wanted to open a bank account in another jurisdiction, they had to take a suitcase of money, travel and talk to the bank at a physical location.
“That’s a lot of steps to take; so, only people who were really motivated or had the resources would actually do that. That’s what we saw in traditional tax evasion cases,” Mangels said.
With crypto, investors can theoretically sit in their living rooms, access an exchange on the other side of the world and start trading.
“If I never tell my tax authority where I’m situated — for example, in France — and I never tell them about the money I made trading crypto on an exchange in Singapore, they won’t know. They’ll have no idea,” Mangels added.
Under DAC8, crypto exchanges and custodial platforms will be required to collect standardized user information tied to tax residence and report aggregated transaction data to national tax authorities. That information is then exchanged across borders.
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DeFi is out of scope, but AML trends could change that
DAC8 and CARF are tax reporting frameworks, but they intersect with Anti-Money Laundering (AML) challenges caused by limited cross-border visibility in crypto markets.
The OECD develops international standards on tax and economic policy, while the Financial Action Task Force (FATF) is a separate body that sets the bar for AML and counter-terrorism financing, both of which now extend to crypto markets. Tax authorities frequently look to AML frameworks for definitions that inform how reporting regimes are designed.
“An interesting fact to know is that the FATF sits in the same offices as the OECD, so you can literally go down the hall or have a coffee with folks there,” said Mangels, highlighting the close working relationship between the two bodies.
That relationship helps explain why DeFi remains outside the scope of current tax reporting rules. At the current state, reporting obligations are assigned to identifiable intermediaries that facilitate transactions as a business. In much of DeFi, there is no centralized operator and no custodial relationship.
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A June 2025 FATF report found regulators are still struggling to identify who actually controls or influences decentralized finance platforms.
The FATF found that 47 of 99 jurisdictions with more advanced rules for crypto platforms require certain DeFi platforms to register as virtual asset service providers (VASPs), the same category that covers exchanges. But even among those jurisdictions, only 12 have identified at least one unregistered DeFi platform that meets the criteria of a VASP.
Tax authorities monitoring jurisdiction shoppers
As DAC8 takes effect across the bloc in 2026, legislators are standardizing what can be gathered from identifiable crypto businesses at scale. That means the first compliance shock lands on centralized exchanges and custodians.
Tax authorities are closely watching AML developments, where efforts to classify VASPs and accountability models could eventually lead to broader reporting obligations for crypto.
Mangels said that the OECD is also focused on preventing regulatory arbitrage. Policymakers are actively monitoring whether crypto services attempt to relocate to jurisdictions that haven’t yet committed to the CARF.
“A big part of my work at the OECD was tracking where crypto service providers were actually relocating. As new crypto centers are developed or come online, they will also be expected to comply with the OECD standards,” Mangels said.
While the OECD cannot directly enforce compliance, jurisdictions that remain outside its standards tend to face reputational and financial pressure, often compounded by FATF scrutiny.
As more economies align their tax and AML rules around shared definitions and reporting standards, the room for jurisdiction shopping is expected to narrow. DeFi remains outside the reporting perimeter for now, but both the OECD and the FATF are signaling that geographic and structural gaps will be temporary features rather than permanent exemptions.
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