Crypto Under Surveillance: What HMRC’s New Reporting Rules Mean for You

If you’re holding crypto on a major exchange, your financial privacy just took a major hit. New regulations mean the UK government now requires all major cryptocurrency exchanges to report user activity directly to HMRC. Trades, transfers, deposits and even wallet addresses are now part of the data HMRC uses to identify and tax crypto investors. 

This isn’t just about more paperwork. It’s a structural shift in how crypto is treated in the UK, transforming decentralised assets into a highly monitored and taxable part of the financial system. If you’re not paying attention, you could be exposing yourself to unexpected tax bills, audits or penalties. 

Here’s what’s changing, and what you can do to protect yourself.

What’s Changed: HMRC’s New Reporting Pipeline 

As of 2025, crypto exchanges serving UK residents—whether based in the UK or overseas—must comply with HMRC’s updated reporting rules. This follows the UK’s adoption of the OECD’s Crypto-Asset Reporting Framework (CARF) and is part of a global push to close gaps in crypto tax compliance. 

Exchanges must now report: 

• Full trade histories, including token swaps 

• Wallet addresses linked to user accounts 

• All deposits and withdrawals 

• Customer KYC (Know Your Customer) data, like name, address and ID 

Even if your crypto is held overseas or through a foreign platform, HMRC expects you to report it if you’re a UK tax resident. HMRC uses this data to cross-check with self-assessment returns, and any mismatches can trigger reviews or investigations.

What It Means for Investors

1. Full Tax Visibility 

Selling, swapping, or trading crypto? It’s likely taxable. HMRC doesn’t treat crypto-to-crypto swaps as tax-free and staking or yield income can be subject to income tax too.

2. Reduced Financial Privacy 

Your identity is now tied to your crypto activity through KYC data. Even if you’re just holding long term, your holdings and transactions are visible to HMRC, like any other financial asset.

3. Higher Risk of Penalties 

If your previous self-assessments didn’t include crypto activity—or you haven’t reported at all—you could face backdated tax bills, penalties or investigations. HMRC has already begun sending letters to those flagged by data from exchanges. 

Why Leaving Crypto on Exchanges is a Risk 

Centralised exchanges like Binance, Kraken and Coinbase offer convenience, but they’re also a direct data pipeline to HMRC. That means: 

• Total traceability: Every trade and transfer is linked to your verified identity. 

• Potential account freezes: UK authorities can request platforms to freeze accounts for tax or compliance reasons. 

• Custodial risk: You don’t control the private keys, so if the platform fails or is hacked, your assets are at risk. 

Case in point: In 2023, several UK users had accounts restricted after sending funds to wallets flagged as “suspicious” by blockchain analytics. This kind of centralised control defeats the whole purpose of crypto ownership. 

How to Reclaim Privacy and Control 

You can stay fully compliant while still protecting your autonomy. Here’s how:

Move to Cold Storage 

Hardware wallets like Ledger and Trezor keep your crypto offline and in your control. You still need to report gains or income, but cold storage removes the risk of platform freezes and third-party data sharing.

Use Decentralised Exchanges (DEXs) 

DEXs like Uniswap and SushiSwap let you trade directly from your wallet without centralised oversight. HMRC can still see on-chain transactions, but there’s no direct link to your identity through an exchange’s KYC data.

Diversify with Privacy Coins 

Tokens like Monero (XMR) and Zcash (ZEC) use advanced cryptography to hide transaction history. While they’re not illegal in the UK, they’re often delisted from major platforms—so be aware of liquidity and legal considerations.

Get Proactive with Tax Planning 

Crypto tax rules are complex, and professional advice can save you money and stress. A crypto-savvy accountant can help you plan ahead, report correctly and avoid costly mistakes. 

You Can Stay Compliant Without Surrendering Control 

The bottom line is that HMRC now treats crypto like any other financial asset. If you’re trading or holding on major platforms, your data is already visible. But that doesn’t mean you have to give up control or privacy entirely. 

With the right tools and awareness, you can protect your financial sovereignty and comply with UK rules—without handing everything over to the system. The surveillance is real. So is the solution. 

If you’re holding significant amounts of crypto, reading our full guide is a must. We cover everything you need to know to stay compliant and protect your assets. You can find it here: https://crypto.growth-hub.biz/

Important Note: 
This information is general and not personal financial advice. Crypto tax rules are evolving, so always check with a professional before making decisions. The right advice can help you stay compliant and protect your wealth.