Michael Klein

Leaders of the G20 countries have called for the swift implementation of the CryptoAsset Reporting Framework (CARF) and amendments to the Common Reporting Standard.

CARF, developed by the OECD, standardises the reporting of crypto asset transactions and holdings to facilitate the automatic exchange of such information with a taxpayer’s home jurisdiction.

Following a summit in New Delhi, India on 9 and 10 Sept., G20 leaders asked the Global Forum on Transparency and Exchange of Information for Tax Purposes in a joint declaration to identify an appropriate and coordinated timeline to commence exchanges by relevant jurisdictions of crypto asset information.

The communiqué noted the desire of a significant number of jurisdictions to start CARF exchanges by 2027.

The Crypto Asset Reporting Framework (CARF)

The CARF rules and guidelines, published in October 2022, set out the scope of crypto assets that are covered; the entities and individuals who are subject to data collection and reporting requirements; which transactions must be reported; and due diligence procedures to identify crypto asset users and controlling persons, as well as the relevant tax jurisdictions for reporting and exchange purposes.

The OECD said in its CARF report that the framework was needed because “the current scope of assets, as well as the scope of obliged entities, covered by the Common Reporting Standard (current standards) do not provide tax administrations with adequate visibility on when taxpayers engage in tax-relevant transactions in, or hold, relevant crypto assets.”

The framework aims to collect and automatically exchange information on transactions for relevant crypto assets on an annual basis, similar to the Common Reporting Standard (CRS), which covers the automatic cross-border exchange of financial account information.

The definition of crypto assets “includes assets that can be held and transferred in a decentralised manner, without the intervention of traditional financial intermediaries, including stablecoins, derivatives issued in the form of a crypto-asset and certain non-fungible tokens”.

As such the CARF will target any digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions.

Carve-outs are included for assets that cannot be used for payment or investment purposes and for assets already fully covered by the CRS.

Entities or individuals that provide services effectuating exchange transactions in crypto assets for, or on behalf of, customers would have to report under the CARF.


Under CARF rules crypto asset firms must report on exchanges between relevant crypto assets and fiat currencies, exchanges between one or more types of digital assets and transfers of crypto, including retail payment transactions, in the country where they conduct business.

To reflect the crypto asset framework, the Common Reporting Standard also has to be amended to cover certain electronic money products and central bank digital currencies.

Other proposed changes to CRS concern indirect investments in crypto assets through derivatives and investment vehicles.

Roadmap

Following the delivery of the CARF and the amended CRS in October 2022, the OECD completed the technical work on the international exchange architecture for both frameworks and in June 2023 recommended they should be recognised as international standards.  

The OECD invited the Global Forum, in a move that has now been endorsed by the G20, to take forward its work to identify jurisdictions of relevance for implementing the CARF and to ensure its widespread implementation.

The Global Forum is establishing a group of interested members to take forward the work in relation to the framework and is discussing the amended CRS in its AEOI Peer Review Group.

India’s finance minister Nirmala Sitharaman previously stated the country would push the G20 under its presidency towards the regulation of virtual assets.

The joint declaration, however, only repeated the endorsement of the Financial Stability Board’s high-level recommendations for the regulation, supervision and oversight of crypto asset markets and global stablecoin arrangements.

G20 leaders further acknowledged several reports on digital assets by the International Monetary Fund and the Bank for International Settlements on key elements and risks of the crypto ecosystem and central bank digital currencies, stating that finance ministers and central bank governors will discuss a roadmap at their meeting in October 2023.