The Crypto-Asset Reporting Framework or CARF was recently released by the Organization for Economic Co-operation and Development (OECD).
Key facts
- The CARF aims to ensure the collection and automated exchange of information on crypto assets with jurisdictions of taxpayers’ residences every year in a standardized manner.
- The framework defines crypto assets as any assets that are held and transferred in a decentralized manner, without the involvement of traditional financial intermediaries. These assets are issued in the form of crypto derivatives, stablecoins, or certain non-fungible tokens.
- This definition does not include entities that use cryptography only to keep records and does not have ownership rights. It also does not include Central Bank Digital Currency, which has separate reporting requirements.
- Intermediaries and other service providers enabling the exchange and transfer of crypto-assets like brokers and ATM operators are included within the scope of this framework.
- The framework was developed amid the rapid progress in the crypto industry.
- In 2021, the crypto industry witnessed the market capitalization of 715 billion USD in January spiking to nearly 3 trillion USD before plunging in 2022.
- Besides providing a definition of the assets and reporting entities, the CARF also outlines the data that needs to be reported and the due diligence to be conducted by crypto-asset users.
- The framework mandates that the crypto asset firms must report to the country in which they operate. They must report about exchanges between relevant crypto assets and fiat currencies, and the exchanges between one or more types of crypto assets as well as other transfers of crypto, including retail payment transactions.
- As for the due diligence process, the framework requires individual and entity customers and persons to identify themselves.
- The CARF will be presented to the G20 Ministers and Central Bank Governors on October 12 and 13.
- The framework has model rules that can be adopted in domestic legislation for the regulation of crypto asset transfers.