The OECD’s Global Cryptoasset Reporting Rules Are a Positive Step

The OECD published a public consultation document in March 2022 on a new global tax transparency framework to enable reporting and information exchange of cryptoassets, as well as proposed amendments to the common reporting standard for the automatic exchange of information on financial accounts between countries.

In June 2023, the Organization for Economic Cooperation and Development published the cryptoasset reporting framework and 2023 update to the common reporting standard. This publication contains the cryptoasset reporting framework, CARF, and a set of amendments to the common reporting standard, or CRS, along with associated commentaries and exchange of information frameworks (collectively referred to as the international standard for automatic exchange of information in tax matters), as approved by the OECD’s Committee on Fiscal Affairs over the course of 2022–2023.

The CARF Structure

The CARF consists of three distinct components:

Rules and related commentary that can be transposed into domestic law to collect information from reporting cryptoasset service providers with a relevant nexus to the jurisdiction implementing the CARF.
A multilateral competent authority agreement on automatic exchange of information pursuant to the CARF and related commentary (or bilateral agreements or arrangements).
An electronic format (XML schema) to be used by competent authorities for purposes of exchanging CARF information, as well as by reporting cryptoasset service providers, to report CARF information to tax administrations (as permitted by domestic law).

These rules and commentary have been designed around four key building blocks:

The scope of crypto-assets to be covered: The proposed definition of cryptoassets focuses on the use of cryptographically protected distributed ledger technology, or DLT, as this is a distinctive factor underpinning the creation, holding, and transferability of cryptoassets. The definition also includes a reference to “similar technology” to ensure that it can include new asset classes that arise in the future and operate in a functionally similar way to cryptoassets. Therefore, the definition of cryptoassets is aimed at those assets that can be held and transferred in a decentralized manner, without the intervention of traditional financial intermediaries, including stable coins, derivatives issued in the form of cryptoassets, and certain non-fungible tokens. Excluded from the definition are central bank digital currencies, which function in a similar way to money held in a traditional bank account; the reports on them will be included within the scope of the CRS. The definition of cryptoassets is aimed at ensuring that all assets covered by the new tax reporting framework are also within the scope of the Financial Action Task Force recommendations, which ensures that the due diligence requirements of intermediaries can be based on existing anti-money laundering and know your customer obligations.
The entities and individuals subject to data collection and reporting requirements.
The transactions subject to reporting, as well as the information to be reported in respect of such transactions.
The due diligence procedures to identify cryptoasset users and controlling persons and to determine the relevant tax jurisdictions for reporting and exchange purposes.

Relevant Transactions

The following relevant transaction types will be reportable under the new framework:

Exchanges between cryptoassets and fiat currencies.
Exchanges between one or more forms of cryptoassets.
Transfers (including reportable retail payment transactions) of relevant cryptoassets.

Transactions will be reported in aggregate form by relevant cryptoasset type and will distinguish incoming and outgoing transactions.

Common Reporting Standard

Along with the CARF, the OECD has also developed proposals as part of the first comprehensive review of the CRS, with the aim of further improving its functioning based on the experience gained by governments and companies over the past seven years since its adoption.

The proposal expands the scope of the CRS to cover electronic money products and digital currencies of the central bank.

Final Thoughts

Many jurisdictions have already established information regimes where virtual asset service providers, or VASPs, are obligated to report operations both to anti-money laundering and terrorist financing agencies, and to tax administrations.

However, currently a major limitation for states is that they only have the power to require subjects residing in their jurisdictions to report cryptoassets operations. States don’t currently have information on transactions conducted through VASPs located abroad, since these aren’t required to share information with central banks, tax authorities, or other public bodies.

It is therefore a particularly good initiative to implement an international exchange regime for transactions involving cryptoassets, similar to the CRS, which could start with cryptocurrencies as a first stage. If this fails to happen, we will continue to see a proliferation of information regimes in different countries, creating complexity for VASPs and taxpayers that conduct operations in different countries, and increasing their tax compliance costs.

I am convinced that today, more than ever, we must continue to make progress in international cooperation and multilateralism, and in public–private partnerships involving academic and expert centers.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Alfredo Collosa is a consultant and tutor in tax administration at the Inter-American Center of Tax Administrations, CIAT. He holds an Official Masters in Public Finance and Tax Administration (UNED-IEF).