OECD Introduces Reporting Framework to Enhance Crypto Tax Transparency

OECD Unveils Crypto-Asset Reporting Framework (CARF)

The Organisation for Economic Cooperation and Development (OECD) has published a new framework aimed at enhancing visibility on cryptocurrency transactions and the identities of users behind these transactions. The announcement, made on October 10, emphasizes the organization’s commitment to counteract potential tax evasion linked to crypto assets.

Annual Information Exchange Proposed

The proposed Crypto-Asset Reporting Framework (CARF) will be presented to G20 finance ministers and central bank governors during their meeting on October 12-13. This innovative framework seeks to enable the automatic annual exchange of information regarding crypto transactions across jurisdictions, addressing concerns related to the rapidly growing number of unregulated exchanges and wallet providers.

Mitigating Tax Evasion Risks

The OECD highlights the increased risk of tax evasion arising from the lack of transparency surrounding crypto transactions outside the existing Common Reporting Standard (CRS). The CARF aims to include provisions for crypto assets that are not intended for payment or investment, along with those already covered under the CRS.

Regulatory Obligations for Service Providers

“Today’s presentation of the new crypto-asset reporting framework and amendments to the Common Reporting Standard will ensure that the tax transparency architecture remains up-to-date and effective,” stated OECD Secretary-General Mathias Cormann. The CARF will require entities or individuals providing services for crypto-asset exchange transactions on behalf of customers to comply with the new reporting obligations.

Implications for Global Cooperation

Developed in response to an April 2021 directive from the G20, the CARF framework mandates reporting on the specific type of cryptocurrency involved and the nature of the transaction—whether through an intermediary or service provider. Additionally, the OECD’s recent amendments approved in August have brought central bank digital currencies (CBDCs) under the reporting scope.

Enhanced Transparency for 38 Member Countries

If adopted, the CARF framework could facilitate improved information-sharing on crypto transactions among the OECD’s 38 member countries, including major economies such as the United States, Japan, South Korea, and numerous European nations. This initiative represents a significant step toward fostering transparency and reducing the potential for illicit activities in the expanding realm of digital currencies.