New U.K. Data Rules Could Mean More Info from Crypto Users, But Is It Worth the Risk?
In a recent turn of events, a major crypto platform confessed that contractors let slip user data. At the same time, the United Kingdom has unveiled strict new regulations mandating firms to gather and report extensive personal data on all crypto transactions. Starting January 1, 2026, crypto companies in the U.K. will be required to monitor virtually everything – every client, every transaction, every crypto movement. This initiative aims to bring clarity and accountability to a sector often criticized for its lack of transparency.
HM Revenue and Customs made the announcement on May 14, stating that crypto firms must gather the full names, home addresses, dates of birth, and tax identification numbers of individual users. Moreover, companies, partnerships, and charities must also comply, providing legal business names, addresses, and registration numbers. These regulations encompass all transactions, even those involving transfers between wallets. While these rules align with global standards, they go a step further by applying them domestically, not just internationally. Firms must submit reports annually, with potential fines of up to £300 (around $398) per user for non-compliance.
Protecting consumers is the primary goal behind these measures, with the intention of establishing a more secure regulatory framework. Additionally, the regulations seek to close tax loopholes and align with broader global standards, such as the European MiCA regulation. HMRC advises firms to start preparing early to avoid a last-minute rush. Mark Aruliah, head of EMEA policy at Elliptic, a blockchain analytics company, views this as a necessary progression for an industry evolving towards parity with traditional finance.
While Aruliah acknowledges the potential challenges for smaller startups, he believes transparency is crucial despite the associated costs. He emphasizes the importance of balancing these costs against the benefits that regulations provide. Critics, however, raise concerns not about data collection itself, but about the security of this data. The recent breach at cryptocurrency exchange Coinbase, where contractors were bribed by attackers to access sensitive customer information, highlights the risks involved in handling personal data.
The breach compromised names, emails, phone numbers, addresses, and even partial Social Security numbers of users. Some individuals reported exposure of ID documents like passports and driver’s licenses. Despite Coinbase’s claim that less than 1% of its user base was affected, the breach raises questions about the capability of crypto companies to safeguard such information. While Coinbase detected the breach internally, blockchain investigator ZachXBT suggests warning signs were visible earlier through scams linked to Coinbase’s infrastructure.
If the U.K.’s CARF-aligned rules were already in effect, Coinbase could face substantial fines and reputational damage. The juxtaposition of the U.K. urging firms to collect personal data while a major exchange struggles to protect it underscores the challenges in data security within the crypto industry. As the deadline approaches for these new regulations, the focus must shift to ensuring the safety and integrity of user data in an increasingly digital landscape.
