54 jurisdictions commit to implement the Crypto Asset Reporting Framework (CARF) by 2027
On the 10th of November 2023, a joint statement was issued by 54jurisdictions announcing they will commit to implementing the Crypto-Asset Reporting Framework (CARF) by 2027. CARF is a key component of theInternational Standards for Automatic Exchange of Information in Tax Mattersdeveloped by the Organisation for Economic Co-operation and Development (OECD) under a G20 mandate.
The OECD’s Secretary-General Mathias Cormann welcomed today’s announcement saying ““Today’s announcement of co‑ordinated international action on crypto-assets is a major step forward, marking another important milestone towards the widespread and co-ordinated approach to combat tax evasion through greater transparency and exchange of information,”
The list of jurisdictions committing to the implementation of CARF under the joint statement includes the following:
- Armenia
- Australia
- Austria
- Barbados
- Belgium
- Belize
- Bermuda
- Brazil
- Bulgaria
- Canada
- Cayman Islands
- Chile
- Columbia
- Croatia
- Cyprus
- Czech Republic
- Denmark
- Estonia
- Finland
- Faroe Islands
- France
- Germany
- Gibraltar
- Greece
- Guernsey
- Hungary
- Iceland
- Indonesia
- Ireland
- Isle of Man
- Italy
- Japan
- Jersey
- Korea
- Liechtenstein
- Luxembourg
- Lithuania
- Malta
- Mauritius
- Mexico
- Monaco
- Netherlands
- Norway
- Portugal
- Romania
- Singapore
- Slovakia
- Slovenia
- South Africa
- Spain
- Sweden
- Switzerland
- United Kingdom
- United States of America
According to a Policy Paper from the United Kingdom posted on HM Treasury webpage, these 54jurisdictions play host to some of the most active crypto markets and will need to work towards transposingCARFinto their domestic law and activating exchange agreements in time for exchanges to commence by 2027, subject to national legislative procedures as applicable.
The crypto-asset reporting issue will be further discussed at theGlobal Forum’s 16thPlenary Meetingtaking place in Lisbon, Portugal from 29 November to 1 December 2023.
How do CARF and CRS overlap?
Alongside publication of the CARF in October 2022 the OECD also published amendments to the Common Reporting Standard (CRS), which will be implemented by Participating Jurisdictions. The Policy Paper also noted that the signatory jurisdictions will need to implement amendments to the CRS, agreed to by the OECD earlier this year, in line with the same timeline of by 2027.
As expected, there are overlaps between CARF and the CRS amendments. There are three areas where CARF and CRS amendments seeks to address overlap:
1. Prevent overlap with definition of Relevant Crypto Assets at Section IV(A) (e.g., SEMP/CDBC fall only in CRS amendments).
2. Mitigating overlap at Section I(G) of CRS amendments which turns off gross proceeds reporting under CRS where these have been reported under the CARF.
3. Mitigating reporting where there is an overlap, by allowing due diligence conducted for CRS amendments to be relied on for CARF purposes (see Section D of CARF)
United States commit to Implement CARF
Out of the 54jurisdictions listed, the US is definitely the most notable and surprising to be join CARF, this is because currently the US is not a participating jurisdiction under CRS. By committing to CARF the IRS and US Treasury recognize the benefit of receiving reportable information on sales of digital and crypto assets effected for US tax payers by non-US brokers through the automatic exchange of information with other jurisdictions under CARF. Currently W8 forms don’t collect all necessary information that is required under CRS and CARF, and thus US due diligence is not as robust.
This means that the US are going to have many challenges ahead of them in order to implement the CRS amendments required for digital assets under CARF. Furthermore the IRS and US Treasury are still in the process of finalizing the proposed regulations for Digital Asset Information Reporting released on 25th August 2023. IRS recently extended the comment period rescheduled the public hearing for Proposed Regulations of Digital Assets from the 7th to the 13th of November 2023. In order for the US to implement CARF we should expect to see modifications to these proposed regulations, this may also impact the proposed timetable for these regulations.
TAINA’s Automated Compliance Solution for CARF Requirements
With the growing number of Crypto accounts or wallet holders, automated compliance processes are key to ensuring compliance with the CARF and CRS requirements. Automation can and does minimize the effort of introducing changes as CARF is implemented and evolves.
Additionally, it can manage the differences in requirements by country/jurisdiction. Although CARF represents a general framework for reporting, the jurisdictions can still amend and enhance the requirements for reporting. The regulatory framework will only grow from this point, therefore having automated systems that adapt and are easy to update is key to robust compliance.
TAINA is the market-leading, fully automated FATCA and CRS Validation Platform that is revolutionizing the way that financial institutions, crypto, and digital asset companies manage CARF and CRS compliance. TAINA’s automated compliance platform is being used at scale by the world’s largest and most sophisticated financial institutions to revolutionize their customers’ experience and compliance.
TAINA’s flexible and lightweight platform validates CRS Self-Certification forms in all formats, saving our clients costs and time, reducing their risk, and radically improving their customer and investor experience.
We would love to talk to you more about how our award-winning FATCA and CRS Validation platform will help you deal with the proposed CARF requirements. For more information get in touch or request a demo to see it in action.
