The UK Tax Authority (HMRC) is attempting to transfer the "information notice rights," which have long been used in the banking system, into the crypto world. According to Forbes, by October 8, 2026, a reform proposal promoted by HMRC plans to allow tax authorities to directly request user information from cryptocurrency service providers without a court order, for the purpose of verifying reported income and tracking potential tax evasion. Unlike traditional bank ledgers that only circulate between institutions and regulators, transaction records on public blockchains like Bitcoin are written on a distributed ledger visible to all, permanently preserved. Once an address is linked to a name, address, or tax identifier, all past and future flows of funds can be traced continuously by tax authorities and any observers. Under this expansion of authority, public blockchains may transform from a "transparent payment network" into a detailed magnifying glass for tax audits, creating a direct collision between the policy goals of combating tax evasion and improving tax efficiency and the long-term, traceable privacy risks faced by crypto users.
From Banks to Crypto Service Providers: HMRC Aims to Investigate Deeper and Broader
Under the existing framework, HMRC can already require traditional financial institutions like banks to provide customer account and transaction records to verify reported income against actual fund flows. The key change in the reform proposal is to extend this "information notice right" to the crypto asset sector: no longer focusing solely on fiat accounts, but requiring exchanges, custodians, and other cryptocurrency service providers to also surrender user information and relevant transaction details during tax audits. For HMRC, this means they can obtain on-chain addresses, identity information, and historical operations directly from the platform level, piecing together a more comprehensive tax profile from fragments previously dispersed across public blockchains and user reports.
From a regulatory perspective, this expansion of authority is explicitly framed as "strengthening tax compliance, combating tax evasion, and improving revenue collection efficiency": as long as the information notice rights cover mainstream crypto service providers, assets and income hidden on the chain will be harder to "miss" during the tax reporting process. Although the reform proposal had not yet received final approval from UK government ministers as of October 8, 2026, and specific texts may still change, the expectations surrounding taxation in the crypto ecosystem have already shifted — in the future, it will no longer be just a matter of "whether or not something was reported," but confronting the reality of potentially more direct data connections between platforms and tax authorities, along with systematic associations between identities and on-chain behaviors.
The Broad Definition of 'Service Provider' Ignites Privacy Anxiety
After the reform proposal entered public discussion, the first to sound the alarm was not an exchange, but the crypto tax software company Recap. According to Recap, the definition of cryptocurrency "service providers" in the proposal is not limited to licensed trading platforms or custodial institutions, but may also encompass non-custodial wallet software providers. In their interpretation, those who only offer signature tools and interfaces, and never touch user private keys or asset custody rights, could still fall under HMRC’s information notice rights. Furthermore, Recap believes that blockchain explorer operators, hardware wallet manufacturers, and tax software providers could also be viewed as "service providers," simply because they participate in displaying, organizing, or assisting with on-chain data.
The core of the controversy lies in the fact that these technical entities often do not possess complete identity information yet inevitably encounter behavioral data surrounding addresses. Bitcoin transaction records are by default published on public blockchains, with the transaction history of all addresses visible to the public; once names, home addresses, or tax identifiers are linked to a wallet address during the use of a tool, the technical providers become crucial interfaces between identity and on-chain behavior. In the scenario Recap worries about, if such interfaces are legally included in the scope of information retrieval, developers might be forced to assume additional compliance obligations in design and storage aspects, while users would face the reality of having more usage traces systematically compiled and long-term traceable. There is currently no public final legal text that confirms the specific scope of "service providers," but the privacy and compliance pressures raised by this broad definition have become an unavoidable unresolved issue in the UK crypto technology ecosystem.
Once Identity Is Linked to Wallets: Bitcoin Transactions Will Be Permanently Tracked
In the traditional financial system, while bank transaction records are detailed, they are stored in closed systems, invisible to external observers, and institutions also have rules regarding deletion and data retention times. Recap points out that the ledger logic in the Bitcoin world is entirely different: every transaction is written into the public blockchain from the beginning, and all addresses' payment history is visible to anyone; once created, it is preserved in a technically meaningful "permanent record" manner. Over the past decade, all income and expenditure records for an address are like being etched in stone, publicly available in on-chain browsers, allowing anyone to trace back at any moment.
What sharply escalates privacy pressure is this "linking" between the public ledger and real-world identities. If a Bitcoin wallet address is bound to a name, home address, or tax identifier during account opening, tax filing, or compliance review, then all previous on-chain transactions that have occurred for that address will gain real-world annotation tags from that moment onward. More importantly, every future payment will also automatically fall within the scope of sustainable tracking; once tax authorities obtain and organize such mapping data, they can theoretically preserve it for long-term audits and comparisons. Compared to traditional bank records, which are usually closed and deletable, this combination of "public ledger + identity tags" significantly increases the extent of privacy exposure, causing many who thought they were merely using a string of meaningless addresses to reconsider how much space they can retain that is not systematically recorded and scrutinized in the world of crypto assets.
Tax Compliance vs. Privacy Rights: The Dilemma for UK Crypto Users
From the regulator's perspective, HMRC's logic is not complex: since it already possesses information notice rights in the banking system for combating tax evasion and improving tax collection efficiency, replicating the same tools in the cryptocurrency sector is a natural extension packaged as "enhancing tax transparency and enforcement efficiency." For those users who consider themselves compliant and report earnings on time, it seems superficially to only add a verification path from the tax office rather than an unexpected hostility. However, once the information notice rights extend from traditional financial institutions to a broader set of "crypto asset service providers," the focus of discussion quickly shifts from "reasonable taxation" to "where the data boundaries lie," which is also why many UK users instinctively start to defend themselves.
Recap's warning resonates because it directly addresses the vagueness of these boundaries: if non-custodial wallet software, blockchain explorers, hardware wallet manufacturers, and even tax software providers could potentially be viewed as "service providers," it means that roles that only provided technical tools would also be pushed to the forefront of information access. For users accustomed to managing assets with non-custodial wallets and hardware wallets, their past psychological expectation was that "the tools do not recognize me, only the address," and tax software was more seen as a tool to assist in organizing reports, rather than a direct conduit to the tax office. Now, once these tools are included under the scope of information notice rights, users must weigh the pressures between two choices: continue usage but accept a higher probability of their identity and on-chain behavior being systematically associated, or intentionally reduce the frequency of tool usage and risk making compliance reporting more cumbersome and prone to errors. Notably, as of now, there is no evidence showing that UK users have drastically changed their product usage habits due to this proposal; responses remain at the expectation and discussion level, with real impacts depending on how the final legal text defines the specific scope of "service providers" and whether sufficient privacy protection measures are simultaneously introduced.
The Proposal Has Not Yet Materialized: Three Key Issues to Watch Next
Extending from traditional bank accounts to on-chain addresses, HMRC is trying to cover existing information notice rights over cryptocurrency service providers, tightening the rope between "improving tax collection efficiency, combating tax evasion" and "amplifying the privacy exposure risks of public blockchains": once names, addresses, and tax identifiers are systematically linked to on-chain addresses like Bitcoin, tax authorities and other observers can reconstruct users' financial trajectories over a long time dimension. This not only could reshape local product forms and compliance processes in the UK but also change how ordinary users understand and use cryptocurrency tools. The good news is that, according to Forbes, as of October 8, 2026, this reform has not yet received final approval from UK government ministers; the true watershed lies in the next three key issues: first, how the final legal text specifies whether HMRC can, and under what procedures and scopes, retrieve customer data from different types of cryptocurrency service providers; second, whether the boundary of "service providers" narrows to traditional financial intermediaries like custodial platforms, rather than including non-custodial wallet software, blockchain explorers, hardware wallet manufacturers, and tax software as Recap warned; third, whether binding privacy protection mechanisms will be explicitly embedded in the text to limit the long-term traceability of identity information combined with on-chain public records. Other countries' tax authorities are already exploring paths for the management of crypto assets, and the UK’s ultimate formulation and practice could serve as a reference; whether it becomes a model for "balancing compliance and privacy" or a precedent for stronger on-chain surveillance will depend on the direction of these three key variables.
Join our community to discuss and become stronger together!
Exclusive Hyperliquid benefits for AiCoin: https://app.hyperliquid.xyz/join/AICOIN88
Exclusive Aster benefits for AiCoin: https://www.asterdex.com/zh-CN/referral/9C50e2
On-chain Telegram community: https://t.me/AiCoinWhaleData
On-chain community: https://www.aicoin.com/link/chat?cid=N6OVMor5g
On-chain Twitter for AiCoin: https://x.com/aicoinwhaledata
免责声明：本文章仅代表作者个人观点，不代表本平台的立场和观点。本文章仅供信息分享，不构成对任何人的任何投资建议。用户与作者之间的任何争议，与本平台无关。如网页中刊载的文章或图片涉及侵权，请提供相关的权利证明和身份证明发送邮件到support@aicoin.com，本平台相关工作人员将会进行核查。
