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It’s a new world for crypto reporting

The release by the Organization of Economic Cooperation and Development on Oct. 10, 2022, of a new global tax transparency framework for crypto assets demonstrates that the world is moving quickly toward recognizing and standardizing the process. 

“Draft regulations were proposed in March, and they already have a final draft of [the Crypto Asset Reporting Framework],” noted Erin Fennimore, head of tax and information reporting at TaxBit. 

“Ready or not, this is what tax looks like when it moves at lightspeed,” said Tony Tuths, digital asset practice leader and principal in alternative investments, tax, at Big Four firm KPMG.

“The G20 is fully expected to endorse the recommendations,” he said. “Of course, each country will still need to implement the recommendations in their own way. Nevertheless, these rules are focused on the exchanges and wallet providers, and seek to impose tax-reporting obligations on these entities as they act as on-ramps and off-ramps to the blockchain.”

The process began in 2017, when the OECD adopted a common reporting standard providing for the exchange of information between members. Countries that adopted the standard would automatically report and receive tax-related information, but the standard did not specifically address virtual assets.

Then in March 2022, the OECD released a public consultation document outlining its proposed global tax framework for crypto assets. CARF — the Crypto Asset Reporting Framework — is the result.

“CARF covers a wide range of digital assets, including cryptocurrency, stablecoins, tokenized financial instruments, and certain non-fungible tokens,” said Fenimore. “Reporting will include customer-level activity for buying, selling, trading, and transferring in-scope digital assets. Also, while reporting will be on an aggregate basis, transaction-level tracking, with fair market value, will be required.”

In addition to CARF, the OECD also issued amendments to the common reporting standards. “This is a key milestone in the global pursuit of regulatory clarity for digital assets,” Fennimore observed. 

“CARF and the changes to the CRS offer a framework specifically related to crypto transactions and the parties that facilitate them,” she said. 

Mining bitcoins

Arina Habich/arinahabich –

CARF broadly defines crypto assets that would be covered by the new requirements as a “digital representation of value that relies on a cryptographically secured distributed ledger or similar technology to validate and secure transactions.” By including a reference to “similar technology,” the OECD intends to include new assets that may arise as the digital asset ecosystem evolves, according to Fennimore.

Three categories of assets are excluded from CARF reporting: central bank digital currencies, specified electronic money products, (both of which are already included in the scope of the CRS), and crypto assets that cannot be used for payment or investment purposes.

Those that are required to collect and report information under CARF are called CASPs, or Crypto Asset Service Providers. A CASP refers to any individual or entity that, as a business, provides a service effectuating exchange transactions for or on behalf of customers. For purposes of this definition, “customer” includes users of services of reporting CASPs.

It is currently unclear which countries will be officially adopting CARF, according to Fennimore. “The EU is expected to adopt CARF later this year.”

Since the U.S. is not part of the CRS network, it will not automatically receive information about people operating outside the country. However, it has its own information reporting and receives similar information under the Foreign Account Tax Compliance Act, which requires foreign financial institutions and certain other non-financial foreign entities to report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments. The act also requires U.S. citizens to report, depending on the value, their foreign financial accounts.

According to Justin Woodward, co-founder and president of TaxBit, the OECD’s new CARF will “propel the mainstream adoption of digital assets by establishing a consistent global regulatory tax framework. The framework is an acknowledgment by the OECD that cryptocurrencies, tokenized assets, NFTs, decentralized finance, and other emerging technologies are beginning to become embedded into the world’s financial system.”

Read More: It’s a new world for crypto reporting

Disclaimer:The information provided on this website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the website’s content as such. does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.

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