Digitization of trade and finance raises unique risks but also offers openings for tax and customs administration. In such a rapidly evolving setting, turning fiscal revenue risk to opportunity can be demanding. A new form of digital public-private partnership may hold the key to abating risks and unlocking these revenue streams. In this article, I will explore the concept of digital intermediaries, as separate from the taxpayer, intermediaries who stand in and take responsibility for both the outcome and the process of compliance.
“Intelligence is the ability to adapt to change,”
– Stephen Hawking
We love the progress and promise of digitization, but it’s all very technical and requires deep expertise and experience. It’s doubtful that taxpayers or most governments can keep up with the pace of digital advances – nor can we. Perhaps only through collective effort and intelligence, through collaboration between government and industry, can we consider moving on an approach that creates this specialize intermediary with the requisite expertise and experience. The world is simply moving too fast for old approaches.
As trade goes digital, traditional voluntary compliance regimes may falter due to altered risk/reward trade-offs. Remedies such as restricting bank payments to non-compliant offshore entities fail when money itself digitizes and moves outside of bank/state control. Adapting to such swift digital-led change is not something most tax and customs regulators typically have experienced in their lifetimes. Enter the digital intermediary.

5 Key Takeaways
- Role of Digital Intermediaries: Digital intermediaries represent a new compliance paradigm, offering governments real-time data flows and certified technology processes while supporting businesses with streamlined, API-based compliance solutions. Unlike traditional intermediaries, their core focus is guaranteeing compliance through systems validated by governments.
- Technology Driving Compliance Transformation: Emerging technologies such as AI, blockchain, and cloud computing enable tamper-resistant, auditable compliance systems. These systems offer a dual-track approach: efficient compliance for digital transactions through intermediaries and traditional methods for non-digital activities.
- Government Collaboration is Essential: Governments must work with private industry to build and certify compliance systems tailored to digital transactions. Accelerating trends in e-commerce, digital currencies, and AI underscore the urgency for governments to embrace innovative compliance methods.
- Questions of the Digital Economy: The rapid digitization of trade and finance poses risks to fiscal revenue collection if compliance systems fail to adapt. Traditional voluntary compliance models and existing intermediaries may falter as digital transactions evolve beyond state and bank controls.
- A Call for Collaborative Innovation: Addressing these challenges requires collective intelligence from governments, businesses, and industry experts. Testing open-source, adaptable compliance systems on a small scale in innovative jurisdictions could lay the foundation for global adoption.
The Role of Digital Intermediaries
Marketplaces, customs brokers and banks traditionally play the role of intermediaries, obligated by the jurisdiction to comply or help ensure compliance of their clients. This is often under duress, as their core business is elsewhere, and compliance support is a major burden they would much rather not shoulder. This stands in contrast to what we term a “digital intermediary” an entity or cooperative organization whose core business is warranting compliance of its customers; both private and public:
- Supporting businesses with compliance by offering a simple digital means of effecting compliance, in the form of a comprehensive compliance API, and
- Supporting governments with real time flows of data and revenue, using a technology and process approach certified, immutable and remotely auditable by the government.
Legal Frameworks for Digital Intermediaries
Legally, digital Intermediaries can hypothetically perform in two modes. They can either assume liability and “step into the shoes” of the business, or act as a service provider only and assume no liability. In either form, the defining element of a digital intermediary is that their success depends upon the cooperation of the government in certifying the systems and processes utilized.
As such the intermediary is not just a vendor or a way for taxpayers to offload responsibility. Rather the key is the system and process offered that are central to the intermediation between the taxpayer and the government. The system must be certified by the government as correct under extensive joint testing. To some extent this is the realization and expansion of the “Tax Compliance by Design” work by the OECD, recently re-envisioned as “Tax Administration 3.0”. While the former was a SME focused concept and the latter for large enterprises, the proposed digital intermediary concept focuses only on digital transactions and therefore is potentially more near term in its ability to be realized.
Technology Behind Digital Intermediaries
Realization leverages recent advances in technology, including AI, blockchain and cloud. Systems are now possible that can intermediate compliance for digitally based transactions; e-commerce, crypto trading, and future digital forms that may arise. In these circumstances, multiple AI models and blockchain rules are created for each government and “certified” against a set of test cases mutually agreed upon, then deployed in unchangeable form on the cloud. Once certified the system is enabled for use by businesses and government. It is tamper resistant until such time as it is revised and upgraded to the next government certified version.

Compliance through these methods would remove the need for traditional compliance and reporting for digital transactions. Non-digital would still follow existing lines of responsibility. Thus, a two-track path would be enabled – a fast, efficient and outsourced means of complying through the intermediary services when transactions are digital, and a legacy means for all other transactions.
The Case for Government Collaboration
The above conceptual framework, and all the details behind it, is worth little without governments willing to work together with private industry to build a designed compliance system for digital transactions. Why should a government devote time and effort towards this? It’s clear to me that digitization is accelerating as evidenced by recent example below:
- Cross border e-commerce is growing at over 30% per year,
- The US vs. BRICS+ trade & digital currency wars are heating up,
- Trillions are flowing globally between digital wallets outside the banking system,
- AI agents just transacted between themselves on the blockchain,
- A politician meme coin just raised $15 billion in one day,
- The ChatGPT leader tweeted about being near the AI singularity
It’s all pointing to more and faster digitization of our societies. If this article is not relevant for you now, it likely will be soon.
Certain Risks on the Horizon
I fear that without efforts to embrace these trends and adapt to them, or even dare I say exploit them, compliance and associated fiscal revenue may increasingly miss the expanding digital economy.
Perhaps we should explore doubling down on existing intermediaries, but this approach risks further centralizing power and all that it entails. Further, it’s possible decentralization forces intermediaries to eventually lose control of some aspects of their business, negating their ability to effect compliance. The genie is rapidly emerging from the bottle so to speak.
Innovating Compliance Systems
Based upon my twenty years in direct and indirect tax, finance and software roles, combined with ten years in global tax policy and regulatory I have my doubts about the adaptability and pace of existing approaches and institutions. Long standing principals yes, but compliance system and process that can quickly embrace what is going on today and tomorrow – not a chance.
My thinking is that it is probably time to try a new approach before the challenge for governments become intractable. Having been involved in an early pioneer of the intermediary concept, one taking tax liability for SME’s but doing so without a certified system, its clearly possible but not workable for an intermediary without government certification. The opportunity is to jointly build and test open-source compliance systems that are correct, transparent, secure and adaptable. It’s being done with AI and blockchain now with thousands of specialists collaborating in real time. Why not try it for compliance – on a small scale, in an innovative country, with willing businesses serving as test participants.
To this end, this is the first in a series of articles that I and my co-collaborators will write to explore this topic more deeply. But we need your input, especially those of you in policy or IT roles within appropriate government institutions. Only together can we define a workable solution that alleviates businesses from compliance burdens, secures the fiscal revenue and adapts quickly to new digital innovations. I invite you to send your comments and we will promptly respond and look to incorporate them into future articles.

Finance and regulatory tax software professional with 30 years of industry experience. He focuses on the opportunities for blockchain and AI to reduce friction and fraud in trade and commerce.