Crypto

OECD Presents New Crypto-Asset Transparency Framework to G20

The OECD today released a new global tax transparency framework to enable the reporting and exchange of information regarding crypto-assets.

The Crypto-Asset Reporting Framework (CARF) responds to a G20 request for the OECD to develop a framework for the automatic exchange of information between countries on crypto-assets. The CARF will be presented to G20 finance ministers and central bank governors for discussion at their next meeting on October 12-13 in Washington DC, as part of the OECD Secretary-General’s latest fiscal report.

The new transparency initiative, developed in collaboration with G20 countries, comes against the backdrop of rapid adoption of the use of crypto-assets for a wide range of investment and financial uses. Unlike traditional financial products, crypto-assets can be transferred and held without the intervention of traditional financial intermediaries, such as banks, and without any central administrator having complete visibility on the transactions carried out or on the holdings of crypto-assets. The crypto market has also spawned new intermediaries and service providers, such as crypto-asset exchanges and wallet providers, many of which are currently unregulated.

These developments mean that crypto-assets and related transactions are not fully covered by the OECD/G20 Common Reporting Standard (CRS), increasing the likelihood of their use for tax avoidance purposes while jeopardizing the progress made in tax transparency through the adoption of the CRS.

“The Common Reporting Standard has been very effective in combating international tax evasion. In 2021, more than 100 jurisdictions exchanged information on 111 million financial accounts, covering total assets of €11 trillion,” said OECD Secretary-General Mathias Cormann. “Today’s presentation of the new Crypto Asset Reporting Framework and changes to the Common Reporting Standard will ensure that the tax transparency architecture remains current and effective.”

With this in mind, the CARF will provide transparency with respect to crypto-asset transactions, by automatically exchanging this information with taxpayers’ jurisdictions of residence on an annual basis, in a standardized manner similar to the CRS.

CARF will target any digital representation of value that relies on a cryptographically secured distributed ledger or similar technology to validate and secure transactions. Exclusions are provided for assets that cannot be used for payment or investment purposes and for assets already fully covered by the CRS. Entities or individuals providing services performing crypto-asset exchange transactions for or on behalf of clients would be required to report under the CARF.

The CARF contains model rules that can be transposed into national legislation, as well as commentaries to help administrations implement them. Over the coming months, the OECD will continue its work on legal and operational instruments to facilitate the international exchange of information collected on the basis of the CARF and to ensure its effective and widespread implementation, including the timetable for start of exchanges within the framework of the CARF. .

The OECD has also proposed to the G20 a series of additional amendments to the CRS, intended to modernize its scope to comprehensively cover digital financial products and to improve its operation, taking into account the experience gained by countries and companies. As with the CARF, this work will be complemented by an update of the international legal and operational mechanisms for the automatic exchange of information in accordance with the modified CRS, as well as a coordinated timetable for bringing the agreed modifications into force.

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