DAC8 Reporting for Wallet Providers

Wallet providers — entities that offer software or hardware solutions for storing and managing crypto-assets — face a critical threshold question under DAC8: whether their services bring them within the directive's reporting scope. The answer depends significantly on whether the wallet is custodial or non-custodial, and on the nature of the services provided.

The Custodial vs. Non-Custodial Distinction

This distinction is fundamental to understanding DAC8 obligations for wallet providers:

Custodial Wallet Providers

Custodial wallet providers hold and manage users' private keys on their behalf. The provider has control over the crypto-assets stored in the wallet, and users rely on the provider to execute transactions. Custodial wallet providers are generally expected to fall within DAC8's scope because they:

• Safeguard crypto-assets on behalf of users, which is a recognized crypto-asset service.
• Facilitate transfers when users send or receive crypto-assets.
• Have access to user data and transaction records necessary for reporting.

Custodial wallet providers that qualify as RCASPs should expect to face the full range of DAC8 obligations, including due diligence, transaction reporting, and record-keeping.

Non-Custodial (Self-Custodial) Wallet Providers

Non-custodial wallet providers offer software tools that allow users to manage their own private keys. The provider does not have access to or control over the user's crypto-assets. Examples include mobile wallet apps, browser extensions, and hardware wallets where the user retains sole control of their keys.

Non-custodial wallet providers are generally less likely to fall within DAC8's scope because:

• They do not hold or safeguard crypto-assets on behalf of users.
• They typically do not facilitate transactions as intermediaries — the user interacts directly with the blockchain.
• They may not collect or have access to the user identification data required for reporting.

However, this should not be treated as an absolute exclusion. Non-custodial wallet providers should still assess their specific operations, as certain features or services may bring them closer to the intermediary role that DAC8 targets.

When Non-Custodial Wallets Might Be in Scope

Several scenarios could potentially bring non-custodial wallet providers within DAC8's reporting perimeter:

Integrated Exchange Services

Some non-custodial wallets offer built-in exchange functionality, allowing users to swap crypto-assets within the wallet interface. If the wallet provider facilitates these exchanges — rather than simply connecting the user to a third-party service — it may be providing an exchange service that triggers RCASP status.

Fiat On-Ramp Integration

Wallets that enable users to purchase crypto-assets with fiat currency through integrated services may be acting as intermediaries in those transactions, potentially creating reporting obligations for the fiat-to-crypto exchanges.

Transaction Facilitation

If a non-custodial wallet provider routes transactions, selects nodes, or otherwise intermediates the blockchain interaction beyond providing a simple user interface, this may be relevant to the provider's classification.

Reporting Obligations for Custodial Wallet Providers

Custodial wallet providers that qualify as RCASPs should anticipate the following reporting requirements:

Transfer Reporting

Transfer of crypto-assets into and out of the wallet are likely reportable events. This includes:

• The aggregate fair market value of crypto-assets transferred during the reporting period.
• The number and type of crypto-assets transferred.
• Whether transfers were made to other RCASPs or to non-RCASP addresses.

Exchange Reporting (If Applicable)

If the custodial wallet also facilitates exchanges (crypto-to-crypto, crypto-to-fiat), these transactions should be reported with gross proceeds, fair market values, and unit counts.

User Due Diligence

Custodial wallet providers must collect and verify user information, including:

• Full legal name and date of birth
• Tax Identification Number (TIN)
• Country of tax residence
• Address

Providers should review their current onboarding processes to ensure all DAC8 data points are collected and validated.

Hardware Wallet Manufacturers

Manufacturers of hardware wallets (physical devices for storing private keys) occupy an interesting position. As producers of non-custodial storage devices, they typically do not provide intermediary services and should generally not be classified as RCASPs. However, if the manufacturer also operates companion software with integrated services (such as staking, swapping, or buying crypto-assets), those services should be evaluated independently.

Multi-Signature and Shared Custody Models

Some wallet solutions use multi-signature arrangements where multiple parties hold different keys needed to authorize transactions. In such models:

• If the wallet provider holds one or more keys necessary for transaction authorization, it may be providing a custodial or co-custodial service.
• The degree of control the provider exercises over transactions may determine whether it qualifies as an RCASP.
• Providers should carefully analyze their role in the multi-signature arrangement relative to DAC8's definitions.

Practical Recommendations

1. Classify the wallet service as custodial, non-custodial, or hybrid, and assess RCASP status accordingly.
2. Review all integrated features (exchanges, on-ramps, staking) for potential reporting triggers.
3. For custodial providers: Ensure user onboarding captures all DAC8-required data points.
4. For non-custodial providers: Document the non-intermediary nature of the service and monitor regulatory guidance.
5. For multi-signature providers: Analyze the level of control exercised and seek legal advice on classification.
6. Monitor Member State transposition for any jurisdiction-specific guidance on wallet provider classification.

Conclusion

The DAC8 reporting landscape for wallet providers hinges on the custodial nature of the service and the extent of intermediation involved. Custodial wallet providers should prepare for full reporting obligations, while non-custodial providers should carefully assess whether any aspect of their service brings them within scope. As regulatory guidance develops, all wallet providers should stay informed and ready to adapt.

This article provides general information and should not be treated as legal or tax advice. Wallet providers should consult qualified professionals for guidance on their specific classification and obligations under DAC8.