The G20 asked the OECD to develop the Crypto-Asset Reporting Framework (CARF) for the automatic exchange of information on crypto-assets with the intention to preserve international tax transparency initiatives.
A public consultation process is underway, with policy-makers asked to consider the possible adoption of the new framework and its related design components.
Key Points
- A new global tax transparency framework proposed by OECD for the collection and exchange of tax-relevant information between tax administrations.
- Common Reporting Standards (CRS) to enable automatic exchange of financial account information independently of traditional financial intermediaries.
- Due diligence procedures must be applied by those who provide services to exchange crypto-assets against other crypto-assets, or fiat currencies. This includes identifying customers and reporting their exchanges and values annually.
The new framework provides for the collection and exchange of tax-relevant information between tax administrations, with respect to persons engaging in certain transactions in crypto-assets. Currently, traditional financial assets and fiat currencies fall within the scope of CRS while, in most instances, crypto-assets do not. This is because neither cold wallets nor crypto-asset exchanges fall within the current scope CRS reporting obligations.
A second proposal from OECD will address amendments to CRS to cover electronic money products and Central Bank Digital Currencies as well as indirect investments in crypto-assets through investment entities and derivatives.
This is a significant move towards building a global regulatory framework for virtual currencies and exchanges, providing the much-needed transparency between regimes. The OECD will conclude public consultation end of May and plans to finalise the rules and commentary to the CARF and the amended CRS at the next G20 meeting in October 2022. Between now and then, there is a lot for policy makers to consider.
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