OECD releases global transparency framework for crypto-assets

The Organization for Economic Co-operation and Development (OECD) has released a new global tax reporting framework for crypto-assets about its collection and automatic exchange of information.

The Crypto-Asset Reporting Framework (CARF), developed by the Paris-based intergovernmental organisation OECD, comes after a G20 request that the OECD develop a framework for the automatic exchange of information between countries on crypto-assets.

One major development that the OECD has sought to address is the emergence of crypto-assets, which can be transferred and held without interacting with traditional financial intermediaries and without any central administrator having full visibility on either the transactions carried out, or the location of crypto-asset holdings.

The framework, which was approved in August 2022, consists of rules and commentary that can be transposed into domestic law to collect information from crypto-asset service providers, with a relevant nexus to the implementing jurisdiction.

The framework defines crypto assets as blockchain technology that can be issued, recorded, transferred and stored in a decentralised manner, without the need to rely on traditional financial intermediaries or central administrators. They may also include stablecoins, derivatives issued in the form of a crypto-asset and certain non-fungible tokens.

The definition would also cover other intermediaries and service providers like brokers and dealers dealing in crypto assets and operators of crypto-asset ATMs.

The OECD report says the current scope of assets, as well as the scope of obliged entities, covered by the CRS (crypto reporting standard), do not provide tax administrations with adequate visibility on when taxpayers engage in tax-relevant transactions in or hold crypto assets.

CARF, which has been developed considering the crypto boom, is expected to ensure transparency with respect to crypto-asset transactions. This will be done by automatically exchanging information with the jurisdictions of taxpayers on an annual basis.

The crypto market, which touched $3 trillion this year before plunging to $938.64 currently, is growing rapidly. This is affecting tax administrations, which must adapt to the growing role of crypto assets. Several characteristics of crypto-assets are likely to pose novel challenges in tax administrations’ efforts to ensure taxpayer compliance.

OECD Secretary-General Mathias Cormann said: “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.”

The CARF will target any digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions. The CARF contains model rules that can be transposed into domestic legislation, and commentary to help administrations with implementation.

The OECD has also put forward to the G20 a set of amendments to the CRS, which are intended to modernise its scope to comprehensively cover digital financial products. They will also improve its operation, taking into account the experience gained by countries and businesses.

The CARF will be presented to G20 finance ministers and central bank governors for discussion at their next meeting on 12-13 October in Washington D.C.