The Organisation for Economic Co-operation and Development (OECD) - an intergovernmental organisation with 38 countries, established to promote economic progress and world trade has delivered a new global tax transparency compliance framework, known as the Crypto-Asset Reporting Framework (CARF) with model rules for the automatic reporting and exchange of taxpayer information between countries relating to financial accounts and crypto-assets.
The CARF, which responds to a G20 request, will be presented to G20 Finance Ministers and Central Bank Governors at their October 12-13 meeting in Washington to discuss their view on the new regulatory framework.
The new transparency initiative, developed together with G20 countries, comes amid rapid adoption of the use of crypto-assets for a wide range of investment and financial uses which has been a cause for concern due to the nature of cryptocurrencies and related transactions which can be transferred and held without the intervention of financial intermediaries such as banks and are not comprehensively covered by CRS and the tax administrators may not have the adequate visibility into when taxpayers hold or engage in transactions involving crypto-assets. Moreover, the crypto market has also given rise to new intermediaries and service providers, such as crypto-assets exchanges and wallet providers, many of which currently remain unregulated. The CARF framework, therefore, seeks to ensure transparency in crypto transactions by automatically exchanging such information with the local regulators about taxpayers on an annual basis. The CARF aims to achieve this objective by targeting entities offering crypto exchange transaction services on behalf of customers to be obliged to report under the CARF. Most crypto assets such as NFTs, DeFi, cold wallets, wallet addresses, and intermediaries like crypto exchanges and DeFi providers are now comprehensively covered by the reporting standard, unlike in the past.
The CARF framework consists of three building blocks: rules that can be transposed into domestic legislation, guidelines to help local administrators with the implementation of the exchange of information, and technical solutions to support such exchange of information.
The CARF proposal comes at an uncertain time for the crypto market, as recent fluctuations in the values of Bitcoin and other assets have affected several crypto businesses and left them with budget constraints.
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