Centralized exchanges (CEXs) are the most prominent category of CASPs and will generate the largest volume of DAC8-reportable data. This article addresses the specific compliance challenges and strategies for centralized exchange operators.
The CEX Compliance Challenge
Centralized exchanges typically serve millions of users across multiple jurisdictions, process millions of transactions daily, support hundreds or thousands of trading pairs, and offer multiple service types (spot trading, margin trading, staking, custody) within a single platform.
This scale and complexity make DAC8 compliance a significant operational undertaking. The key challenges include collecting TINs and self-certifications from existing user bases that may number in the millions, classifying every transaction according to DAC8's four categories, calculating fair market values for every transaction across all supported crypto-assets, and generating aggregated reports that accurately summarize each user's annual activity.
Data Architecture Requirements
CEXs need a data architecture that can capture all required DAC8 fields at the point of transaction, store historical transaction data with sufficient detail for aggregation, link user identification data to transaction records, and generate XML reports from the stored data efficiently.
Most major exchanges already maintain sophisticated data warehouses for trading analytics, regulatory reporting, and risk management. Extending these systems to support DAC8 reporting is typically more efficient than building new infrastructure from scratch.
User Communication Strategy
The look-back process for collecting TINs and self-certifications from millions of existing users requires a carefully planned communication strategy. CEXs should segment their user base by jurisdiction and activity level, tailor communications to each jurisdiction's language and regulatory context, implement progressive prompts within the platform interface, and set clear deadlines backed by service restrictions for non-compliant users where permitted by law.
Conclusion
Centralized exchanges face the largest DAC8 compliance challenge due to their scale, but they also have the most developed data infrastructure to build upon. Early planning, investment in automation, and a structured user communication strategy are essential for success.
Preparing for DAC8?
Our team helps CASPs with gap analysis, transposition tracking, TIN validation, and XML report generation.