France Proposes Strict Tax Reporting Obligations for Self-Custody Crypto Users

• France’s Ministry of Economy has introduced a new regulatory proposal targeting crypto self-custody and foreign accounts.
• The measure aims to strengthen compliance by obligating digital asset users to declare all transactions executed via self-hosted wallets.
• Industry advocates argue that the broad scope of the reporting framework could stifle innovation and prompt capital flight.

France is moving to tighten its regulatory grip on the digital asset sector, with a newly unveiled legislative proposal that would impose strict tax reporting obligations on cryptocurrency users utilizing self-hosted wallets. According to details outlined in the official French legislative framework, the proposed measures aim to capture transactions previously operating outside traditional institutional reporting structures.

Under the new rules, French crypto investors would be legally required to declare every transaction executed through non-custodial or self-custody wallets, alongside any digital asset accounts held on foreign centralized platforms. The move aligns with broader European Union efforts, including the Markets in Crypto-Assets (MiCA) regulation and the Administrative Cooperation Directive (DAC8), which seek to enhance cross-border tax transparency and curb illicit financial activities.

However, the initiative has quickly drawn criticism from industry participants and legal experts who point out the technical hurdles of tracking self-custody operations. Unlike centralized exchanges that handle KYC (Know Your Customer) data natively, self-hosted wallets are decentralized by nature, often requiring users to interact directly with smart contracts and decentralized applications (dApps) without an intermediary.

As reported by The Block, market observers have expressed concern that overly burdensome reporting requirements could place an unfair administrative weight on retail traders and drive Web3 developers and blockchain startups away from French jurisdiction toward more crypto-friendly European hubs.

The legislative text is currently advancing through parliamentary review, where digital asset stakeholders are lobbying for amendments to clarify compliance thresholds and protect user privacy. If passed in its current form, the regulation could set a precedent for how other European nations handle on-chain self-custody taxation.