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The Organisation for Economic Co-operation and Development announced this Monday it prepared a new Crypto Asset Reporting Framework (CARF). CARF is meant to provide guidance for the automatic exchange of information between countries and will be officially presented at a G20 meeting in Washington on October 12th and 13th.
OECD Presents Framework for International Information Exchange Regarding Crypto
According to OECD, CARF is developed as a way to provide a framework for the automatic exchange of information between countries with regard to crypto assets. It is intended as a way to cover the aspects of digital assets not covered in the current OECD/G20 Common Reporting Standard (CRS).
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. Carve-outs are foreseen for assets that cannot be used for payment or investment purposes and for assets already fully covered by the CRS. Entities or individuals that provide services effectuating exchange transactions in crypto-assets for, or on behalf of customers would be obliged to report under the CARF.
According to the press release, CARF also contains “model rules” that can be used in the drafting of national legislation concerning digital assets. Among other important elements of the framework, CARF is to facilitate the sharing of information on taxpayers dealing with crypto.
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International Drive to Regulate and Tax Crypto
Considering that the market cap of crypto matched that of the world’s top 10 banks in 2021, there is little wonder in the fact governments and international organizations have taken a greater interest in the sector in 2022. In the US, the White House unveiled its first-ever digital assets development framework in September and the EU is working on its own important legislation for crypto—MiCA.
So far, the two focal points for national and international crypto regulation and legislation have been crime prevention and taxation. Notably, the US sanctioned the crypto mixer Tornado Cash—in violation of its own laws according to some analyses—due to it being used to launder stolen money by the likes of the North Korean Lazarus hacking group.
The data sharing between countries could help law enforcement agencies crack down on any crypto-related crime as the improved visibility into the sector frameworks like CARF could provide would make laundering money, and tax evasion far harder to pull off. Internally, the EU is also making plans to standardize tax collection with regard to crypto.
A non-binding resolution that aims to standardize crypto taxes across the EU, and standardize which events are in fact taxable has been passed by the European Parliament last week. This “Impact of new technologies on taxation: crypto and blockchain” also seeks to explore ways in which blockchain technology can be used to automate the tax collection process.
Do you think CARF will end up harming the anonymity of legitimate crypto traders to a severe degree? Let us know in the comments below.