The OECD on October 10 unveiled the ‘Crypto-Asset Reporting Framework (CARF)’ to provide for the reporting and exchange of information with respect to crypto-assets.
Key points
- The CARF responds to a G20 request that the OECD develop a framework for the automatic exchange of information between countries on crypto-assets.
- The new transparency initiative, developed together with G20 countries, comes against the backdrop of a rapid adoption of the use of crypto-assets for a wide range of investment and financial uses.
- Unlike traditional financial products, crypto-assets can be transferred and held without the intervention of traditional financial intermediaries, such as banks, and without any central administrator having full visibility on either the transactions carried out or on crypto-asset holdings.
- The crypto market has also given rise to new intermediaries and service providers, such as crypto-asset exchanges and wallet providers, many of which currently remain unregulated.
- These developments mean that crypto-assets and related transactions are not comprehensively covered by the OECD/G20 Common Reporting Standard (CRS), increasing the likelihood of their use for tax evasion while undermining the progress made in tax transparency through the adoption of the CRS.
- The CARF will ensure transparency with respect to crypto-asset transactions, through automatically exchanging such information with the jurisdictions of residence of taxpayers on an annual basis, in a standardised manner similar to the CRS.
- 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 foreseen 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 be obliged to report under the CARF.
