HMRC explores crypto forensic tools for tax probes as former OECD advisor flags UK's growing compliance push

His Majesty's Revenue and Customs is exploring the procurement of crypto forensic software and investigative support services as part of efforts to combat money laundering and tax fraud involving digital assets.

The market engagement notice, published on the UK government's tender platform this week, outlines a potential procurement for licenses to blockchain tracing software, forensic investigative support, and tools that allow investigators to query blockchain data at scale.

The initiative is intended to support HMRC's Fraud Investigation Service and Risk and Intelligence Service, which handle serious fraud investigations and assess risks to the UK tax system.

HMRC said the tools under consideration would enable capabilities such as automated triage of cases, deep forensic analytics, cross-chain transaction tracing, attribution and risk scoring, and advanced data visualization. The department also highlighted the need for secure and compliant operations, along with training and administrative oversight for investigators.

Potential contracts worth more than $4.6 million

The tax authority is considering procuring two contracts through a single approach, with a combined estimated value of £3.42 million ($4.6 million), excluding value-added tax, over three years.

The contracts are expected to run from April 1, 2027, to March 31, 2029, with a possible extension through March 31, 2030. One contract would provide 55 licenses and 550 hours of investigative support annually, while the second would include 20 licenses and 200 hours of support, alongside training programs for investigators.

The notice is part of a preliminary process designed to gather insights from potential suppliers before any formal tender is issued. HMRC said participation in the exercise would not influence future procurement decisions and noted that the final scope and timeline could change.

Commenting on the development, Colby Mangels, global head of government solutions at Taxbit and a former OECD advisor, said the initiative reflects a broader shift among governments toward building compliance infrastructure for digital assets.

"HMRC's latest engagement with the crypto industry reflects a broader shift that we're seeing globally: governments recognize that digital assets are becoming a significant part of the financial landscape, which requires modern compliance infrastructure," Mangels told The Block. "What's significant about this engagement is the level of sophistication HMRC is seeking."

He added that investigations increasingly require cross-chain tracing, forensic analytics, and real-time blockchain data access as authorities seek to move "as quickly and intelligently as the technology they're policing."

Mangels said the investment aligns with the UK government's ambition to become a global crypto hub, noting the country recently became one of the first jurisdictions to implement the OECD's Crypto-Asset Reporting Framework for overseas transaction data sharing.

"All of these steps are a clear signal that the UK intends to lead by example for crypto compliance, enforcement, and transparency," he said.