DAC8 Reporting for Small and Startup Platforms

Small and startup crypto-asset platforms face the same DAC8 reporting obligations as larger competitors, but with significantly fewer resources to devote to compliance. Understanding the minimum requirements, identifying proportional implementation strategies, and finding cost-effective approaches can help smaller Crypto-Asset Service Providers (CASPs) meet their obligations without overwhelming their operations.

Minimum Requirements Apply Regardless of Size

It is important to understand that DAC8 does not currently establish a general exemption for small platforms based on transaction volume, user count, or revenue. If a platform qualifies as a Reporting Crypto-Asset Service Provider (RCASP) — because it provides exchange, transfer, or safeguarding services for crypto-assets — it should expect to comply with the same core requirements as larger entities.

These requirements typically include:

• User due diligence: Collecting and verifying identification data, TINs, and tax residence for all Reportable Users.
• Transaction tracking: Recording all reportable transactions with the required data fields.
• Annual reporting: Submitting reports to the competent authority by the prescribed deadline.
• Record-keeping: Maintaining records of reported data and due diligence documentation for the required period.

Small platforms should not assume that their size grants them a pass. Competent authorities may audit or inquire about compliance regardless of the platform's scale.

Proportional Implementation

While the obligations are the same, the implementation can — and often should — be proportional to the platform's size and complexity:

Start with the Essentials

Small platforms should prioritize the most critical compliance elements:

1. Data collection during onboarding: Ensure every new user provides all DAC8-required information before they can transact. It is far easier to collect data upfront than to remediate later.
2. Clean transaction records: Maintain accurate, complete records of all transactions from day one. Retroactive data reconstruction is costly and error-prone.
3. Annual report generation: Even if manual, ensure the ability to produce the required report in the correct format by the deadline.

Avoid Over-Engineering

Smaller platforms should resist the temptation to build enterprise-grade reporting infrastructure before it is needed. A well-organized spreadsheet or simple database may suffice for a platform with a few hundred users and moderate transaction volumes, provided the data is accurate and complete.

Scale Compliance with Growth

As the platform grows, compliance processes should scale accordingly. Establishing good data hygiene early makes it easier to transition to automated solutions later without needing extensive data cleanup.

Cost-Effective Compliance Approaches

Leverage Existing KYC/AML Processes

Small platforms that are already collecting KYC/AML data may find that they have much of the information DAC8 requires. A gap analysis comparing existing data collection against DAC8 requirements can identify what additional fields need to be added — often just TINs and self-certification of tax residence.

Use Third-Party Reporting Solutions

Several providers offer DAC8 and CARF reporting solutions as a service. For small platforms, purchasing a reporting solution may be significantly more cost-effective than building one in-house. When evaluating solutions, consider:

• Cost structure: Look for providers with pricing models suited to smaller volumes (per-user or per-report pricing rather than large flat fees).
• Data import flexibility: The solution should accept data in formats the platform can readily produce.
• Jurisdiction coverage: Ensure the solution supports reporting to the relevant Member State authority.
• Updates and maintenance: The provider should keep the solution current with any regulatory changes.

Shared Compliance Resources

Small platforms may benefit from shared compliance resources, such as:

• Industry associations that provide guidance documents, templates, and best practices for DAC8 compliance.
• Compliance consultants who serve multiple small clients and can spread costs across their client base.
• Peer networks where small platform operators share experiences and practical solutions.

Open-Source and Community Tools

As DAC8 reporting requirements become more established, open-source tools and community resources may emerge that small platforms can leverage. Monitoring industry forums and developer communities for such resources could yield cost-effective solutions.

Common Pitfalls for Small Platforms

Delaying Compliance

Some small platforms may be tempted to delay DAC8 preparation, reasoning that enforcement will initially focus on larger players. This is a risky approach — competent authorities may not distinguish by size, and catching up on data collection and reporting retroactively is much harder than building compliance into operations from the start.

Incomplete Data Collection

Failing to collect TINs or tax residence information from users at onboarding creates a remediation problem that grows with the user base. Small platforms should make complete data collection a non-negotiable part of the signup process.

Ignoring Entity Users

Even small platforms may have entity users (companies, partnerships, trusts). The due diligence requirements for entities — including identifying controlling persons — are more involved than for individuals. Small platforms should have processes in place for entity onboarding, even if entity users are uncommon.

Underestimating Record-Keeping

DAC8 requires records to be maintained for a specified period. Small platforms should establish a clear data retention policy and ensure that records are stored securely and are retrievable when needed.

Building a Compliance Roadmap

Small platforms should consider creating a simple compliance roadmap:

1. Immediate: Audit current data collection against DAC8 requirements and close any gaps.
2. Near-term: Implement or procure a reporting solution appropriate for the platform's size.
3. Pre-deadline: Conduct a test run of the full reporting process, from data aggregation to report generation.
4. Post-deadline: Review the first reporting cycle for lessons learned and process improvements.
5. Ongoing: Scale compliance infrastructure in line with business growth.

Conclusion

Small and startup platforms cannot afford to ignore DAC8, but they also do not need to over-invest in compliance infrastructure. A proportional approach — starting with clean data collection, leveraging existing processes, and using cost-effective third-party solutions — can help smaller CASPs meet their obligations without disproportionate cost. The most important step is to begin preparation early and build compliance into the platform's operations from the outset.

This article provides general information and should not be treated as legal or tax advice. Small platforms should seek professional guidance proportionate to their specific circumstances and risk profile.