The UK government has introduced sweeping new data regulations for crypto firms, just as a high-profile security breach has reignited fears around personal data safety in the sector.
From 1 January 2026, all cryptocurrency businesses operating within the United Kingdom will be required to collect and report detailed personal information for every crypto transaction.
The announcement, made by HM Revenue and Customs (HMRC) on 14 May, forms part of a broader strategy to increase transparency, prevent tax evasion, and align with global regulatory frameworks.
Under the new rules, crypto companies must collect full names, home addresses, dates of birth, and tax identification numbers from individual users. For organisations such as companies, charities, and partnerships, firms must gather legal business names, registered addresses, and company registration numbers. These requirements apply to all transactions, including transfers between digital wallets.
Unlike existing international standards that typically focus on cross-border transactions, the UK’s regulations extend to domestic crypto activity. Firms will be required to file annual reports, and those failing to comply could face fines of up to £300 per user.
The initiative is designed to enhance consumer protection and ensure the crypto industry meets similar compliance expectations as traditional finance. It also mirrors recent developments within the European Union, such as the Markets in Crypto-Assets (MiCA) regulation.
Mark Aruliah, head of EMEA policy at blockchain analytics company Elliptic, said the move reflects a natural progression for a maturing industry. While he acknowledged that smaller firms may find compliance costly, he stressed that the benefits of greater regulatory clarity and new reporting solutions outweigh the drawbacks.
Despite support from some within the industry, the timing of the announcement has raised fresh concerns about data security. This follows confirmation from Coinbase, a major US-based crypto exchange, that sensitive user information had been leaked due to a breach involving external contractors.
The leaked data reportedly included names, addresses, phone numbers, emails, and in some cases, partial Social Security numbers. Some users even reported that identity documents, such as passports and driving licences, were compromised.
Although Coinbase stated the breach impacted fewer than 1% of its users, with nearly 9 million active monthly users globally, the scale of the incident is still significant. The breach also highlights the risks associated with storing large volumes of sensitive personal data—exactly the kind of information UK authorities now want firms to collect and secure.
Blockchain investigator ZachXBT previously flagged issues linked to Coinbase’s infrastructure as early as February, noting a series of scams involving impersonated support agents. One victim reportedly lost \$850,000 to fraudsters posing as Coinbase staff.
If the UK’s upcoming rules, which are aligned with the OECD’s Crypto-Asset Reporting Framework (CARF), had already been in effect, Coinbase could have faced severe penalties in the UK. The situation raises critical questions about whether cryptocurrency firms are adequately prepared to safeguard user data on such a scale.
While the UK aims to improve trust and accountability in the crypto market, the industry now faces the dual challenge of meeting heightened compliance standards while ensuring ironclad security for user information.
Firms are being urged to begin preparations well ahead of the 2026 deadline to avoid last-minute disruption. With the spotlight now on both transparency and data security, the next phase of crypto regulation in the UK will require a careful balance between compliance and consumer protection.
