Crypto Transparency Is Coming:CRS 2.0, CARF and Your Clients

The crypto-asset landscape has evolved from a niche asset class to a relatively mainstream investment, but regulatory and reporting frameworks have struggled to keep pace. Facing a potential loss of tax revenues, as well as market and customer risks, regulators and organisations are introducing new frameworks to counter these risks and modernise tax compliance.

CRS 2.0 Enhancements

The OECD’s Common Reporting Standard (CRS) requires financial institutions to collect and report information on account holders to their local tax authority. Once filed, this information is automatically exchanged with the tax authority where the account holder resides.

The framework focuses on traditional financial assets and currencies, but has now been expanded to cover new financial instruments such as central bank digital currencies and electronic money products that were not previously included in the reporting framework. The CRS also now covers indirect investments in crypto-assets through derivatives and investment vehicles.

The Crypto-Asset Reporting Framework (CARF)

The challenge that crypto-assets presents for tax authorities is that the location of the assets is obscured. They can be traded without the involvement of traditional financial intermediaries or central administrators, which means there is little visibility into holdings or transactions. To address this, the OECD has created the Crypto-Asset Reporting Framework (CARF). This will allow for the annual automatic exchange of information on transactions in crypto-assets with the taxpayers’ jurisdictions of residence. Reporting Crypto-Asset Service Providers (RCASPs), such as intermediaries and exchanges, must collect user information, including name, address, tax residence, and Tax Identification Number (TIN), and report transactions made by users with a nexus in a signatory country.

What CARF Covers

The scope of crypto-assets to be reported under CARF includes assets that are held and transferred through distributed ledger technology, such as stablecoins, certain non-fungible tokens (NFTs), and derivatives issued in the form of a crypto-asset. Crypto-assets that have limited tax compliance risks are excluded.

Timelines

Over 50 jurisdictions have committed to implementing CARF from 1 January 2026, with the first exchange of information due by 2027. For example, in the UK, CARF regulations were made on 24 June 2025. In the European Union (EU), the Directive on Administrative Cooperation (DAC) was updated to reflect these changes (known as DAC8), with EU countries having to transpose it into national law by 31 December 2025.

What This Means for Your Clients

The changes to the CRS and the new CARF framework are expected to significantly strengthen the ability of tax authorities to enforce existing tax regimes. This could lead to tax authorities issuing ‘nudge letters’ to individuals.

In the UK, the sale, exchange, and gifting of crypto-assets is subject to Capital Gains Tax (CGT), while the receipt of such assets through income-generating activity, such as employment or mining, is subject to Income Tax and National Insurance Contributions (NICs). Clients with current or historic crypto-asset holdings may want to revisit their tax declarations to ensure that any errors or omissions have been corrected in advance of the new reporting.

Indirect holdings in crypto-assets through funds and other investment vehicles, where they are part of a fund’s investment strategy, are already subject to reporting under the CRS. Where such funds are held as underlying investments of insurance products, reporting is at the policy level by the insurance carrier.