jakiro
Introduction
The rapid development of artificial intelligence and autonomous systems is reshaping the Internet economy, but one of the main obstacles to achieving fully autonomous artificial intelligence systems is the lack of payment systems that enable artificial intelligence agents to operate without human intervention.In May 2025, Coinbase launched x402, which allows APIs and artificial intelligence agents to conduct transactions seamlessly, promoting the use of tools for a more efficient, frictionless and scalable digital economy.In October, the adoption rate of x402 exploded. It processed nearly 500,000 transactions between October 14 and 20, an increase of 10,780% compared to the previous four weeks. It facilitated more than 932,000 transactions between October 21 and 27, an increase of 34,300% over the previous period. The growth momentum continues unabated.
x402 is seamless, sophisticated, and open, posing new challenges to traditional fiscal and taxation logic.Tax authorities urgently need to change their tax collection and administration models, use new tax collection and administration tools, and strengthen international collaboration to implement effective tax collection and administration of transactions under x402.Based on the logic and characteristics of x402, this article analyzes its challenges to traditional fiscal and taxation logic, and proposes fiscal and taxation solutions for x402.
1. x402 overview
x402 is an open payment protocol created by Coinbase that embeds payment functions directly into the Web structure and re-enables the HTTP 402 (Payment Required) status code to achieve an Internet-native, machine-friendly transaction model.
1.1 x402 framework
Like the well-known HTTP 404 (Not Found), HTTP 402 is also an encoding for Internet request and response interactions.When the HTTP standard was first formulated, the designers anticipated that paid resource acquisition might become an important part of the Internet in the future, and reserved the HTTP 402 status code for future payment mechanisms.The idea is that the server can respond to requests in a way that says “you must pay before you can provide this resource.”Today, as automation and artificial intelligence are booming, HTTP 402, a code that has been forgotten for more than thirty years, has set off a new wave of craze in the field of encrypted artificial intelligence.
Based on the HTTP 402 status code, x402 forms a simple and efficient payment framework. The overall process is: the buyer requests resources from the server → [HTTP 402 response] If payment is required, the server will return HTTP402 status code with payment instructions → [Cryptographic Signature Authorization] The buyer prepares and submits the payment payload → [On-chain Settlement] The server uses the x402 coordinator’s /verify and /settle endpoints to verify and settle the payment → If the payment is valid, the server will provide the requested content.x402 makes the payment process as natural as loading a web page.
1.2 Advantages and risks of x402
x402 is seamless, sophisticated and open.Compared with the traditional online payment model, x402 improves the user’s payment convenience. It stitches the payment and resource delivery links, eliminates the need for manual intervention, reduces transaction costs, and makes micropayments and artificial intelligence autonomous agent transactions possible.At the same time, x402 supports any stable currency, digital asset or blockchain, with great flexibility.
x402 maintains native web compatibility and is easy to integrate into any HTTP-based service.Video streaming services can use x402 to charge per second of content viewed, replacing the traditional subscription-based profit model.Trading AI can retrieve real-time stock market data for $0.02 per request.News sites and research platforms could charge regular readers $0.25 per article, allowing pay-as-you-go access rather than forcing a monthly subscription.x402 offers a payment alternative and a new toolkit for monetizing web services.
x402 is still in its early stages and is being gradually built into a complete ecosystem.At the same time, the security risks associated with the rapid expansion of x402 also deserve attention.Some people point out that x402 tokens have problems such as excessive developer permissions and signature replay vulnerabilities. Attackers may use old authorizations to steal funds in the wallet.The surge in illegal cross-chain encryption activities brings major hidden dangers to crime fighting and tax tracking.
2. x402’s challenge to traditional fiscal and taxation logic
Traditional online payments rely on external systems such as credit cards, bank networks, or platform-specific payment processors. These systems are cumbersome to operate, have high system costs, are geographically restricted, and require multiple layers of manual authorization, making them unsuitable for AI-driven transactions.x402 removes these barriers by providing pay-as-you-go, instant transaction completion, and AI-native tokenization (enabling AI agents, human users, and dynamic payments without pre-approval or API keys) embedded in the web fabric.The characteristics beyond traditional payment methods not only bring advantages to x402, but also pose new challenges to traditional fiscal and taxation logic.
2.1 The absence of trusted third parties in seamless transactions
Traditional payment channels usually adopt an account model. Both parties to the transaction need to establish a certain degree of trust with the participation of regulated financial institutions. Intermediaries such as banks or payment service providers become key nodes for fund settlement and information recording.x402 reduces the intermediate links in transactions through point-to-point settlement on the chain, weakening the long-standing power of intermediary participation.
The existing tax system relies heavily on intermediaries as trustworthy compliance nodes. On the one hand, intermediaries bear some reporting obligations, such as banks providing KYC-based cash flow records, payment processing agencies reporting merchant settlement data, etc.; on the other hand, intermediaries assist tax tracking and track taxable events through identity verification.
Because of the isolation of third-party intermediaries, the x402 model loses standardized financial records such as bank statements and payment processor account books as verifiable evidence.In x402, the only objective record is the transaction hash on the blockchain.Although the blockchain is open, transparent and cannot be tampered with, in the absence of mandatory identity binding and transaction reporting obligations, the technical complexity of smart contract structures and transaction paths has significantly increased the threshold for tax authorities to identify taxable time and reconstruct the real transaction chain.Therefore, tax declaration under x402 mainly relies on taxpayers’ self-declaration, supplemented by limited on-chain analysis and risk screening, which to a certain extent makes it more difficult for tax authorities to identify hidden income and undeclared income.
2.2 Fragmentation risks caused by micropayments and machine autonomous transactions
x402 supports micropayments and artificial intelligence autonomous agent transactions, which may involve multiple blockchains and multiple asset types. The problem of fragmentation of tax events has further emerged.Most jurisdictions treat each asset disposal as a taxable event. Even if it is a high-frequency API call, each x402-based payment will form an independent on-chain transaction and may be recognized as an independent taxable event.In addition, x402 may lead to the separation of tax evidence such as transaction time, blockchain and asset type, further leading to tax evidence fragmentation based on the fragmentation of tax events.Without adjusting the existing taxation logic, x402 may lead to a doubling of the number of taxable events and significantly increase the technical difficulty of tax collection and administration.
2.3 The problem of tax identification in multi-chain and multi-assets
x402 supports any stablecoin, digital asset or blockchain.x402’s openness to various blockchains and encrypted assets amplifies the challenges that blockchain and encrypted assets pose to traditional fiscal and taxation logic.This challenge is specifically manifested in tax jurisdiction issues under borderless transactions and tax tracking issues under payment anonymity.
Regarding the issue of tax jurisdiction when transactions are borderless, the location principle is an important basis for the existing tax system to determine the taxpayer’s tax location and tax jurisdiction. However, multi-chain settlement under x402 involves multiple economic activity locations, which may result in the inability to identify the tax location.This makes it difficult to distinguish the tax attribution of transactions, and tax overlaps and tax vacuums may occur.
Regarding the tax tracking issue under payment anonymity, the anonymity under x402 is not just the anonymity of encryption, but the anonymity of both structure and automation based on multi-chain, programmable, and decentralized settlement standards.x402’s artificial intelligence-driven routing, self-custody identity layer, metadata off-chain storage and other factors jointly strengthen information privacy protection, weaken the tax authorities’ ability to obtain complete transaction information through traditional financial intermediaries and centralized platforms, and pose a substantial challenge to the tax collection and administration model centered on third-party reporting.
3. Fiscal and tax solutions for x402
To cope with the challenges brought by x402, tax administration needs to keep up with x402 and implement effective supervision based on its seamless, sophisticated and open features.
3.1 New pivot in obtaining tax information
x402 simplifies the payment process and weakens the fulcrum role of traditional banks, payment institutions and other intermediaries in the tax information chain.In order to maintain the availability and reliability of tax information, tax authorities need to establish new information “anchors” and trust mechanisms within the x402 system.
One possible way is to embed standardized tax metadata into x402, integrate tax supervision into the seamless structure of x402, and require x402 payment requirements and payment certificates to include structured fields such as merchant VAT number, invoice number, and payer tax number hash value to ensure the reliability and traceability of tax information and establish a fulcrum for tax identification.
In addition, from the perspective of keeping the x402 core protocol lightweight, externalized tax information acquisition paths can also be explored: without changing the core settlement logic, structured tax data is carried by ancillary files or parallel data channels, and is encrypted and associated with specific x402 transactions through hash values, thereby expanding the tax information function in a “sidecar” manner.
3.2 New ways of managing taxable events
Regarding the management of taxable events, under the circumstances that x402 may bring about a significant increase in the number of taxable events, the tax authorities need to consider adjusting the existing collection and management model and gradually introduce appropriate collection and management tools.
In terms of the tax collection and management model, when taxable events are highly fragmented, continuing to use taxation on a transaction-by-transaction basis will lead to excessive compliance and management costs.Tax authorities can explore net settlement or regular batch tax collection models to summarize taxable events generated in micropayment scenarios on a monthly or quarterly basis.Specifically, a tax settlement layer can be designed on top of the x402 payment layer to aggregate and classify original transaction events according to tax jurisdiction, tax type and other dimensions, and calculate the net taxable amount for each tax period.Compared with filing declarations one by one, this model is expected to reduce the reporting burden on taxpayers and tax authorities and reduce collection and administration costs while ensuring tax neutrality and fairness.
In terms of collection and management tools, the role of data analysis tools such as artificial intelligence can be further brought into play, and they can be responsible for the automated identification and risk monitoring functions of high-frequency and fragmented transactions.On the one hand, machine learning technology is used to cluster and classify different transaction patterns to assist tax authorities in understanding new taxable behaviors under x402; on the other hand, fragments that may constitute taxable events are automatically extracted from the continuous transaction flow and a pre-filled tax report is generated, which is subject to spot inspection and review by tax personnel.
3.3 Strengthen international cooperation to form new rules
Regarding the coordination of tax jurisdictions, in the context of high cross-border and de-regionalization of x402 transactions, differences in the understanding of tax ownership and the application of rules in various jurisdictions are likely to arise.In order to reduce double taxation and tax vacuum, it is necessary to strengthen exchanges and cooperation through international organizations and bilateral and multilateral arrangements, form a set of basic principles of tax jurisdiction and conflict resolution mechanisms suitable for x402 scenarios, and provide a unified framework for tax jurisdiction of transactions under x402 while respecting the differences in tax systems of various countries to clearly define tax attribution.At the same time, in the context of tax data fragmentation, it is necessary to explore and establish x402-related cross-border tax information sharing arrangements to support cross-border tracking and cross-border reconciliation while complying with statutory confidentiality and data protection requirements.
For the targeted collection and management of x402, the key is to fully understand the technical logic of x402, and on this basis, appropriately transform the programmable elements into regulatory tools.In order to strike a balance between payment innovation and tax collection and management, a more ideal way is to integrate some tax identification, declaration and information recording functions into the x402 structure in the form of standardized interfaces or modules, so that the payment process, business content response and tax collection can be technically connected as much as possible, and the embedded space for fiscal and tax compliance should be reserved at the protocol layer.
4. Conclusion
x402 creates a new paradigm of Internet-native payment. Its seamless, sophisticated, and open features rewrite traditional fiscal and taxation logic. At the same time, it also brings many problems such as opaque fiscal and taxation information and fragmented tax data.Tax authorities urgently need to keep up with the development of the industry and proactively deploy a new artificial intelligence-driven x402 tax collection and compliance system to ensure tax security.
