In the face of a growing crypto market cap, which touched a milestone of $3 trillion in 2021, the OECD decided to create a Crypto-Asset Reporting Framework (CARF), as the current one failed to provide visibility toward the relevant taxable event.
The OECD will present its recently drafted crypto tax reporting framework at the G20 finance ministers and central bank governors meeting in Washington, DC, this week.
The CARF framework, similar to OECD’s Common Reporting Standard (CRS), mandates parties involved in any crypto transactions to provide their identification.
The Organization for Economic Co-operation and Development (OECD) published a new global tax reporting framework for stablecoins, crypto derivatives, and certain NFTs on Monday.
Approved in August this year, the Crypto-Asset Reporting Framework (CARF) is all about collecting and automatically exchanging information on crypto transactions between countries.
This week, the framework will be presented at the G20 finance ministers and central bank governors meeting in Washington, DC. Once it comes into implementation, it would make it possible for countries to monitor the cross-border transfer of crypto assets.
Commenting on this release, OECD secretary-general Mathias Cormann said the new crypto reporting framework and the amendment made to the Common Reporting Standard (CRS) will help “ensure that the tax transparency architecture remains up-to-date and effective.”
Relevant Article: Albania Gives the Green Light to Regulating Crypto Exchanges
The report defines cryptocurrencies as “assets that can be held and transferred in a decentralized manner, without the intervention of traditional financial intermediaries.” It then goes on to cover derivatives issued in the form of a crypto-asset, stablecoins, and certain non-fungible tokens (NFTs).
Intermediaries and other service providers that facilitate exchanges between crypto assets, such as exchanges, brokers, and ATM operators, will also be included in the scope of crypto.
However, the scope of crypto assets covered by the current standards in the Common Reporting Standard “does not provide tax administrations with adequate visibility on when taxpayers engage in tax-relevant transactions in or hold relevant crypto assets,” stated the report.
That’s why the OECD has created this new framework, CARF, which also comes in light of the crypto industry’s rapid growth — from $135 billion in March 2020 to surpass $3 trillion by the end of 2021 before plummeting this year.
In addition, these developments align with the recent developments from the Financial Action Task Force (FATF) in the form of the global anti-money laundering standards, which the crypto industry has pushed back on.
Relevant Article: The White House Launches a Comprehensive Framework for Crypto Assets
According to the CARF rules, crypto asset firms must report in the country where they conduct their businesses. On top of that, exchanges between relevant crypto assets and fiat currencies, as well as transfers of crypto, retail payment transactions, and exchanges between one or more types of crypto, will have to be reported.
Much like the OECD’s Common Reporting Standard (CRS), the due diligence process in the CARF framework also requires both the individual and entity customers and controlling persons to provide their identifications.
The CRS also covers indirect investments in crypto via derivatives and investment vehicles. Amendments were also made to include central bank digital currencies (CBDCs) in the CRS, which sets out the financial account information to be exchanged and reported along with due diligence procedures, instead of the CARF.
Besides introducing these rules, the report noted that the authorities are working on its implementation “to ensure the consistent domestic and international application of the CARF” over the coming months.
______________________
VASPs need a Travel Rule Solution to begin complying with the FATF Travel Rule. So, have you zeroed in on it yet? We have the best solution to suggest: Veriscope! Veriscope is the only frictionless Crypto Travel Rule compliance solution.
Visit our website to read more: https://www.veriscope.network/ and contact our BizDev team for a discussion: https://www.veriscope.network/contact.
Also, follow us on Twitter, LinkedIn, Discord, Telegram, and Medium for up-to-date news from the world of crypto regulations.
