The European Commission has approved a new tax directive for cryptocurrency companies operating within its jurisdiction. This directive is a political agreement of the Council of Ministers of the European Union and sets forth rules for fiscal transparency that must be adhered to by all companies facilitating transactions in the cryptocurrency market for clients within the region.
According to a recent press release from the Commission’s Directorate of Taxation and Customs Union, these new rules will come into effect on January 1, 2026. As a result, all crypto asset service providers (VASPs) will be required to report their customers’ transactions, irrespective of their magnitude.
In addition to registering their companies in the member state where they operate, these providers must provide their clients with accurate identity data and transmit the necessary information about users and their monetary movements to the receiving financial entities. These obligations extend to all financial entities providing services related to electronic money and central bank digital currencies (CBDCs).
While these regulations have raised concerns regarding privacy and data protection laws associated with cryptocurrency transactions, the European Commission views them as essential in combating tax evasion and money laundering. They argue that tax authorities lack crucial information to effectively monitor income generated through the use of crypto assets, limiting their ability to enforce tax payments and depriving states of significant tax revenue.
This latest agreement on fiscal transparency was made based on a proposal prepared by the Commission and will complement the Crypto Asset Market Regulation and the Transfer of Funds Regulation, both approved by the European Parliament last April. The Transfer of Funds Regulation enables tracking of bitcoin and other cryptocurrency transactions in Europe to identify potential illicit activities, aligning with the Financial Action Task Force’s (FATF) “Travel Rule,” which mandates the provision of information on fund origins and beneficiaries.
The European Commission noted that these rules are consistent with the Organization for Economic Cooperation and Development’s (OECD) proposal on crypto assets, which seeks to establish a global framework for fiscal transparency and facilitate reporting and information exchange among cryptocurrency companies.
This development by the European Commission is a significant step in the European Union’s efforts to regulate the growing cryptocurrency sector. Nevertheless, concerns remain on privacy and data protection laws associated with cryptocurrency transactions. However, the Commission views these regulations as essential in combating tax evasion and money laundering.
Bitcoin has continued to maintain its trading levels below $27,000. At the time of writing, Bitcoin is trading for $26,834 and up 0.2% in the past 24 hours.