The Organisation for Economic Co-operation and Development (OECD) introduced significant reform of the global tax transparency framework in November 2023 through the introduction of a new Crypto-Asset Reporting Framework (CARF) and an update of the Common Reporting Standard (CRS), the existing tax transparency standard for the exchange of financial account information.
Together, these initiatives aim to close critical gaps in the global Automatic Exchange of Information (AEOI) regime by including e-money, central bank digital currencies (CBDCs) and crypto assets, while also strengthening due diligence requirements and harmonising data schemas to improve data quality and minimise duplication.
The Common Reporting Standard
The CRS was first published by the OECD in 2014 as the global standard for automatic exchange of financial account information. It was designed to promote tax transparency and help tackle offshore tax evasion. Over 100 jurisdictions worldwide have implemented the CRS and most of those have now been exchanging information since 2018.
The CRS requires participating countries to gather information from Financial Institutions (FIs) in their jurisdiction about non-resident account holders and then share that information with the jurisdiction where the account holder is resident. The information shared under the CRS is:
- The identity information of the Account Holder – name, address, date of birth, and tax identification number (and for some Entity Account Holders, information about their Controlling Persons).
- The name of the reporting FI, the account number, the balance or value of the account on 31 December of the reportable year, and the amount of any income paid or credited to the account by the financial institution (interest, dividends, distributions, gross proceeds from the sale or redemption of financial assets).
The fast-evolving crypto-asset landscape
The growth of the crypto-asset market has created significant challenges to tax transparency frameworks like the CRS. Crypto assets can be transferred and held without interacting with traditional financial intermediaries and without any central administrator having full visibility. In addition, crypto assets as an asset class are generally out of scope for existing AEOI frameworks.
In response, the G20 countries gave the OECD a mandate to develop the CARF, a dedicated global tax transparency framework to facilitate the automatic exchange of tax information on transactions in crypto assets with a taxpayer’s jurisdiction of residence in a standardised manner on an annual basis.
Following a comprehensive review of the CRS, the OECD also adopted a series of amendments in August 2023 with a view to updating the Standard to ensure that gains in global tax transparency were not eroded by the use of virtual assets. This updated regime is generally known as ‘CRS 2.0’.
CRS 2.0 – inclusion of virtual assets and expansion of reporting outcomes
Under CRS 2.0, the scope of the CRS has been expanded to include Specified Electronic Money Products (SEMPs) and Central Bank Digital Currencies (CBDCs). Additionally, indirect investments in crypto assets, including those made through derivatives and investment vehicles, are now potentially within scope, subject to interaction with the CARF regime.
SEMPs are defined as: “digital representations of a single fiat currency, issued on receipt of funds for the purpose of making payment transactions, represented by a claim on the issuer denominated in the same fiat currency, accepted by a natural or legal person other than the issuer, and by virtue of regulatory requirements to which the issuer is subject, redeemable at par for the same fiat currency upon request of the holder of the product.”
CBDCs are defined as “any official currency of a jurisdiction, issued in digital form by a Central Bank”. An account that holds one or more CBDC for the benefit of a customer is a Depository Account.
CRS 2.0 also introduces a more rigorous due diligence framework. To improve the usability of data for tax administrations and increase the efficiency of risk assessment and compliance work, additional data is now required to be reported by FIs on the annual CRS report as follows:
- Whether the reportable Account Holder (or reportable Controlling Person(s) of an Entity Account Holder) has provided a valid Tax Residency Self-Certification. Certifications must be collected at onboarding or within a defined timeframe and must be complete, accurate and up to date. Validation is subject to a ‘reasonableness test’ by the FI.
- For any Equity Interest held in an investment entity that is a legal arrangement, such as a trust, foundation or partnership, the role of the Reportable Person(s) must now be reported. In the case of a trust, relevant roles are settlor, trustee, protector or beneficiary (and their equivalent in the case of foundations or partnerships).
- Whether the account is a Pre-existing Account or a New Account.
- Whether the account is a joint account, and the number of joint Account Holders.
- The type of Financial Account, such as depository, custodial, equity or debt interests, or cash value insurance contract or annuity.
CARF – definitions and reporting responsibilities
The definition of crypto assets under the CARF focuses on the use of cryptographically secured distributed ledger technology, or similar emerging technologies, as the distinguishing factor underpinning the creation, holding and transferability of crypto assets.
It therefore targets assets that can be held and transferred in a decentralised manner, without the intervention of traditional FIs, including stablecoins, derivatives issued in the form of a crypto asset and certain non-fungible tokens (NFTs).
The definition of Relevant Crypto-Assets excludes SEMPs and CBDCs from the scope of the CARF, because reporting on these assets is now in scope under the CRS 2.0. Indirect investments in Relevant Crypto-Assets through traditional financial products, such as derivatives or interests in investment vehicles, are also covered by the CRS.
Under the CARF, a ‘Reporting Crypto Asset Service Provider’ (RCASP) includes any individuals or entities that, as a business, provide a service effectuating Exchange Transactions for or on behalf of customers. This includes crypto exchanges, custodial wallet providers, platforms enabling crypto-to-crypto or crypto-to-fiat exchanges, as well as certain brokers and intermediaries.
A reportable Crypto Asset User is an individual or entity that is a customer of an RCASP and that is resident for tax purposes in a reportable jurisdiction. Entity users include companies, partnerships, trusts and charities. RCASPs must identify Crypto Asset Users, determine their tax residence and report transaction details annually to the relevant tax jurisdictions.
To minimise burdens, due diligence procedures are broadly consistent with the CRS due diligence rules. RCASPs will require:
- Individual Users to provide – name, date of birth, home address, country of residence, tax identification number (TIN) and issuing country.
- Entity Users to provide – legal business name, main business address, company registration number, TIN and issuing country. For some entities, RCASPs are also required to collect information about controlling person(s).
Three types of relevant transaction are reportable under the CARF:
- Exchanges between relevant crypto assets and fiat currencies.
- Exchanges between one or more forms of relevant crypto assets.
- Transfers (including Reportable Retail Payment Transactions) of relevant crypto assets.
CARF reporting will include:
- Customer identification details.
- Tax residence and jurisdiction.
- Transaction values and types.
- Transfers, exchanges and disposals of crypto assets.
Timeline for CRS 2.0 / CARF implementation
For participating jurisdictions, these changes took legal effect from 1 January 2026, with first reporting, in respect of 2026 data, to be provided to Competent Authorities during 2027. Reporting deadlines will vary, based on the deadline prescribed by the relevant jurisdiction’s Competent Authority.
As of December 2025, a total of 48 jurisdictions had committed to undertake first exchanges during 2027: Austria, Belgium, Brazil, Bulgaria, Cayman Islands, Chile, Colombia, Croatia, Czechia, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, Indonesia, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Kazakhstan, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, San Marino, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Uganda and the UK.
A further 27 jurisdictions have committed to undertake first exchanges during 2028: Australia, Azerbaijan, Bahamas, Bahrain, Barbados, Belize, Bermuda, British Virgin Islands, Canada, Costa Rica, Cyprus, Hong Kong (China), Kenya, Malaysia, Mauritius, Mexico, Mongolia, Nigeria, Panama, Philippines, St Vincent & the Grenadines, Seychelles, Singapore, Switzerland, Thailand, Turkey and the United Arab Emirates.
The US has committed to undertake first exchanges during 2029, while Argentina, El Salvador, Georgia, India, and Vietnam have all been identified by the OECD as jurisdictions that are relevant to the CARF, but which have not yet committed to implementation.
It is expected that participating jurisdictions will begin to release updated guidance and information from early 2026 to give FIs and RCASPs time to update their policies and processes and ensure on-going compliance.
Sovereign insight and impact for clients
CRS and CARF are complementary but separate reporting frameworks, so it is important to distinguish between them. The CRS 2.0 primarily addresses financial accounts and indirect crypto exposure, while the CARF focuses on on‑chain or crypto transactions, requiring transaction-level reporting by RCASPs. Both standards have been structured to minimise double reporting and to maintain operational flexibility for institutions that function as both FIs and CASPs.
Private Clients
Crypto assets, due to their decentralised nature, have historically been attractive for those wishing to keep their identity and wealth private. The implementation of CRS 2.0 / CARF marks a shift in transparency: crypto assets can no longer be regarded as out of scope. Private clients should therefore ensure that all crypto-asset related income and gains are accurately declared in their tax returns. If they are not reported correctly, tax authorities will soon have the information to identify discrepancies and open tax enquiries.
FIs and CASPs
Reporting firms should not take these developments lightly. It is essential that policies, procedures and processes are aligned accordingly, with a view to capture and manage the expanded reportable data points, while conducting necessary self-certification outreach in good time.
While initial implementation of the original CRS by Early Adopters in 2016 was generally viewed as a ‘soft-landing’ year, it is highly unlikely that Competent Authorities will provide a similar level of relief for CRS 2.0 implementation. The key take-away for FIs and CASPs is to commence efforts early, with a particular focus on data veracity as a core component in ensuring compliance under the CRS 2.0 / CARF frameworks.
For Sovereign clients with FI or RCASP status, please rest assured that we will continue to undertake and fulfil CRS due diligence and reporting obligations (and by extension the US Foreign Account Tax Compliance Act (FATCA)) on behalf of your entity. Should you have any queries regarding the status of your entity, its reporting responsibilities, or the specific information to be exchanged, please speak to your usual Sovereign contact, who can direct queries to Sovereign’s experienced AEOI compliance team.
