Introduction

Imagine you have a piggy bank, but instead of coins, it’s full of digital money, like Bitcoin or other crypto. Governments want to know what’s inside that piggy bank so they can make sure people pay taxes when they should. But crypto is tricky: it’s digital, it can move across countries, and sometimes it’s hard for tax authorities to see what’s happening. That’s where CARF and DAC8 come in. These are new rules that make crypto companies report what’s going on, so tax authorities can keep better track. In this blog, you’ll learn what CARF and DAC8 are, how they work, who they affect, and why they are a big deal. CARF is an international standard, while DAC8 represents the European Union’s implementation of it. Both frameworks require crypto-asset service providers (CASPs) to report user details and transaction information to tax authorities to enhance transparency and prevent tax evasion.

Beginning on January 1, 2026, these rules will require platforms to collect and verify users’ residency and transaction information, with the first reports for 2026 due to tax authorities in 2027.

What Is CARF?

CARF stands for the Commission on Accreditation of Rehabilitation Facilities, a non-profit, independent organization that evaluates and accredits health and human service providers globally. Achieving CARF accreditation shows that an organization adheres to high standards of quality, safety, and client satisfaction through a thorough assessment process.

 Why It Exists

• Crypto assets (like Bitcoin, stablecoins, and some NFTs) can be transferred without banks, making them less visible to tax offices.
• Because of that, some people could avoid paying taxes on their crypto gains.
• CARF wants to fix that by forcing crypto‑asset service providers (like exchanges or wallet companies) to collect important info about their users and report it.
• This helps governments track who owns how much crypto, where they live for tax, and how they use their digital assets.

Who Reports Under CARF

• The people who must report are called RCASPs: Reporting Crypto‑Asset Service Providers. These include crypto exchanges, brokers, and other platforms.
• Even some decentralized providers (like non-custodial wallets) might be included, depending on how much control they have.

What Information Has to Be Reported

CARF requires that RCASPs do due diligence, meaning they check and collect specific user data, like:

1. User identity: Tax residence (which country the user pays tax in), tax ID (TIN), and other identifying info.
2. Transaction data: What crypto‑assets were bought or sold, how much, and when.]
3. Transfer information: This includes crypto sent from one wallet to another, as well as payments made with crypto.

• All this information is reported annually.
• To share this data between countries, CARF uses a standard data format in XML.
• The OECD made an XML Schema (user guide) to help tax authorities and crypto companies send the data correctly.
• In 2025, there was a technical update to that schema to make it even better.

What Is DAC8?

DAC8, or the Eighth Directive on Administrative Cooperation, is an EU directive that strengthens tax transparency by mandating the automatic sharing of information on crypto-asset transactions and other digital activities among EU member states’ tax authorities. Its goal is to prevent tax evasion and avoidance in the digital economy by giving tax authorities the information they need to ensure proper compliance.

Why the EU Made DAC8

• Crypto is very borderless: someone in Germany could use an exchange in Spain, or a wallet service in another country.
• Because of this, EU tax authorities need a strong way to share data about who owns crypto and what they do with it.
• DAC8 makes it mandatory for crypto companies in or serving the EU to report the needed tax info.
• The rules in DAC8 are based on CARF, so they follow the same global standard.

Key Dates for DAC8

• The EU council adopted DAC8 on October 17, 2023.
• It was officially published on October 24, 2023.
• EU countries must add (transpose) DAC8 into their own laws by December 31, 2025.
• The rules go into effect on January 1, 2026.
• The first reporting year is 2026, and the first data exchanges between EU tax authorities must happen by September 30, 2027.

What DAC8 Requires Crypto Companies to Do

The EU’s DAC8 directive (Directive on Administrative Cooperation) requires crypto-asset service providers (CASPs), including exchanges and wallet providers, to perform rigorous due diligence, collect user and transaction data, and report this information annually to the tax authorities of EU Member States. 

• RCASPs (crypto-service providers) must collect data about their users who are “non-resident” (i.e., users who live in a different EU country than where the service provider is based).
• They need to do customer due diligence, asking users for tax residence and tax ID, and possibly other identifying details.
• Then, they must send that info to their national tax authority.
• After that, the national tax office will share that information with the tax office in the country where the user lives.
• If a company is outside the EU but has EU customers, it may need to register in one EU country for reporting.

What Crypto Assets Are Covered Under DAC8

• DAC8 uses definitions from the EU’s Mica (Markets in Crypto-Assets) regulation to decide which crypto-assets are reportable.
• It covers:
  • Decentralized tokens (like many cryptocurrencies)
  • Stablecoins (digital currencies pegged to a real‑world currency)
  • E‑money tokens (crypto that works like digital money)
  • Some NFTs (non-fungible tokens) too
• Also, DAC8 includes strict rules on reporting the Tax Identification Number (TIN) of users, helping tax offices identify who the crypto really belongs to.

CARF vs DAC8: Quick Comparison

How CARF & DAC8 Work Together

The Crypto-Asset Reporting Framework (CARF) and the EU’s Directive on Administrative Cooperation (DAC8) function together as linked systems for the automatic sharing of tax-related information on crypto-assets. While CARF serves as the international standard, DAC8 provides the legal framework to enforce these rules specifically within the European Union.

CARF and DAC8 are not separate things, they work side by side:

• CARF is a global standard, made by the OECD, that defines how to collect and report crypto‑asset tax data.
• DAC8 is the EU’s law that forces crypto companies in Europe (or that serve EU users) to follow CARF’s standard.
• Because of DAC8, EU countries will share crypto‑asset data with each other every year, based on what service providers report.
• The OECD also changed another tax standard (CRS) at the same time to include more digital‑asset stuff, so crypto is more aligned with traditional finance.

Technical Details: How the Data Is Shared

• The OECD made an “XML Schema”, a kind of technical template, so that countries and crypto companies can share data easily and correctly.
• There is a user guide for tax authorities to follow when they accept CARF reports.
• Crypto service providers can also use this schema themselves (if their country’s law allows) to report data in the same format.
• The 2025 update to the schema fixed some technical things and made the instructions clearer.
• There is also a “status message schema” that lets tax authorities report back errors (like if a data file is wrong) in a structured way.

Why These Rules Matter

For Tax Authorities

• They get better visibility on crypto usage and ownership, which was hard before because of how digital and cross-border crypto is.
• With annual reporting, tax offices can audit or assess taxes on crypto gains more fairly.
• Automatic data exchange means cooperation between countries is stronger, no more hiding crypto in another country.

For Crypto Companies

• They have to collect more data (like where users pay tax, their tax ID, and more).
• They need systems that can report in XML and follow the technical rules set by the OECD.
• For non-EU companies serving EU clients, they may have to register in an EU country for reporting.
• If they don’t comply, they could face penalties, or risk not being allowed to operate in certain jurisdictions.

For Crypto Users / Investors

• If you use an exchange or wallet that falls under CARF or DAC8, you might need to provide your tax ID and where you live (for tax).
• More of your crypto transactions get reported, so there’s less privacy when it comes to tax.
• On the bright side, this could lead to fairer tax treatment, since gains and transactions are more visible to tax authorities.

Challenges & Risks

• Privacy concerns: Many users worry that mandatory reporting means governments are watching every move in crypto.
• Technical burden: Implementing CARF’s XML schema can be technically hard and expensive for smaller crypto firms.
• Global mismatch: Not all countries may implement CARF or DAC8 in the same way or at the same speed.
• Data security: When tax authorities exchange data, there must be very strong protections so user info stays safe.
• Regulation cost: Crypto companies may pass the cost of compliance to users.

What Should People Do to Prepare

For Crypto Users / Investors

1. Be ready to share tax info: Make sure you know your tax residence and tax ID.
2. Keep good records: Track your trades, transfers, and wallet activity.
3. Talk to a tax advisor: If you trade a lot or hold a lot of crypto, it’s smart to get professional help.

For Crypto Service Providers

1. Upgrade systems: Build or improve your compliance and reporting systems.
2. Use the XML schema: Make sure your reporting matches the OECD’s standards.
3. Train your team: Educate people on what CARF and DAC8 require.
4. Communicate with users: Tell customers why you need their tax info and how you will use it safely.
5. Focus on data security: Protect the sensitive info you collect and share with tax authorities.

Big Picture: Why This Is a Turning Point

• CARF and DAC8 are helping bring crypto into the regulated financial world, not just as a speculative toy.
• These rules make tax systems fairer by reducing the chance of hiding crypto gains across borders.
• They show that governments are serious about regulating crypto, not to kill it, but to make sure everyone plays by the rules.
• Over time, this could lead to more trust in crypto, especially among mainstream investors and institutions.

Conclusion

CARF and DAC8 are two of the most important tax rules for crypto today:

• CARF is the global standard set by the OECD, requiring crypto-asset service providers to report user information and transaction data.

• DAC8 is the EU law that enforces CARF for European crypto companies and platforms serving EU users.

Starting in 2026, crypto companies under DAC8 must begin collecting and verifying user data and transactions. By 2027, EU tax authorities will start exchanging this information. While these rules reduce anonymity in crypto for tax purposes, they also help create a more transparent and trustworthy crypto tax environment.

If you own crypto, trade on exchanges, or operate a crypto service, now is the time to understand CARF and DAC8 and prepare accordingly. For guidance, advice, and support on navigating these rules, visit 7accountants, your trusted partner for crypto tax compliance and reporting. Being prepared will help you stay compliant and potentially save money and stress down the road.