DAC8 Reporting for Crypto Payment Providers

Crypto payment providers — entities that enable merchants and consumers to use crypto-assets for everyday transactions — may face specific reporting considerations under DAC8. As intermediaries that facilitate the exchange of crypto-assets for goods, services, or fiat currency, payment providers should carefully evaluate whether and how DAC8's requirements apply to their operations.

Payment Providers as Reporting Entities

DAC8 captures entities that provide services to exchange or transfer crypto-assets on behalf of others. Crypto payment providers typically facilitate at least one of these activities:

• Converting crypto-assets to fiat currency at the point of sale on behalf of merchants.
• Processing crypto-asset payments between consumers and merchants.
• Facilitating transfers of crypto-assets from a payer to a payee.

Where a payment provider acts as an intermediary in these transactions, it should generally expect to fall within DAC8's definition of a Reporting Crypto-Asset Service Provider (RCASP). However, the specific scope may depend on the provider's operational model and how the relevant Member State transposes the directive.

Payment-Specific Transaction Reporting

Payment transactions differ from trading activity in several important ways, and payment providers should consider how DAC8's reporting framework applies to their specific transaction types:

Consumer-Side Reporting

When a consumer uses crypto-assets to make a payment, the payment provider may need to report the transaction as a disposal of crypto-assets by the consumer. This typically includes:

• The fair market value of the crypto-assets at the time of the transaction.
• The type and amount of crypto-asset used.
• Aggregate gross proceeds for the reporting period.

Merchant-Side Reporting

Merchants who receive crypto-asset payments — or whose payments are converted to fiat by the provider — may also be Reportable Users. Payment providers should assess whether they need to report on:

• The aggregate value of crypto-assets received by each merchant.
• Whether the merchant retains crypto-assets or receives fiat settlement.

Micro-Transactions and Aggregation

Payment providers typically process high volumes of relatively small transactions. DAC8 reporting generally requires aggregation of transaction data on an annual basis per user and per crypto-asset type. Payment providers should ensure their systems can aggregate potentially millions of small transactions accurately.

Retail Payment Thresholds

One practical question for payment providers is whether DAC8 establishes any de minimis thresholds below which individual transactions need not be tracked. Based on the directive's framework:

• There does not appear to be a per-transaction reporting threshold. Even small retail payments should typically be included in aggregate calculations.
• The obligation is generally to report the aggregate gross proceeds and number of units for the reporting period, rather than individual transaction details.

Payment providers should verify whether their Member State's implementation introduces any additional thresholds or exemptions for small-value payment transactions.

Merchant Transaction Handling

Payment providers that serve merchants face particular considerations:

Merchant Onboarding

DAC8 due diligence requirements apply to all Reportable Users, which may include merchants. Payment providers should ensure their merchant onboarding processes collect the required information, including:

• Legal entity name and registration details.
• Controlling persons and their identification.
• Tax Identification Numbers (TINs) for the entity and controlling persons.

Settlement Models

The reporting treatment of a transaction may depend on how settlement occurs:

• If the merchant receives crypto-assets directly, the transaction may need to be reported as a crypto-asset transfer.
• If the payment provider converts to fiat before settling with the merchant, the crypto-to-fiat exchange may be the reportable event.

Payment providers should document their settlement flows clearly to determine the correct reporting treatment.

Interaction with Payment Services Regulation

Crypto payment providers may also be subject to other regulatory frameworks, including the Payment Services Directive (PSD2) and potentially the forthcoming PSD3. DAC8's tax reporting requirements are separate from and additional to any payment services regulation. Providers should be mindful of:

• Data collection requirements that may overlap with or differ from payment services KYC obligations.
• Record-keeping periods that may not align across different regulatory frameworks.
• Reporting timelines that operate independently of payment services reporting.

Practical Recommendations

Payment providers preparing for DAC8 should consider:

1. Mapping transaction flows to identify all points where reportable events occur.
2. Assessing whether both consumers and merchants are Reportable Users requiring due diligence.
3. Building aggregation capabilities that can handle high transaction volumes across multiple crypto-asset types.
4. Reviewing settlement models to determine the correct classification of each transaction type.
5. Coordinating with merchants to collect necessary tax identification information.
6. Consulting with advisors on the interaction between DAC8 and payment services regulations.

Conclusion

Crypto payment providers operate at the intersection of everyday commerce and crypto-asset services, creating unique reporting considerations under DAC8. The high volume and small value of typical payment transactions, combined with the need to report on both consumers and merchants, means that robust data infrastructure and clear transaction classification are essential.

This article provides general information and should not be treated as legal or tax advice. Payment providers should consult qualified professionals for guidance tailored to their operations.