With the emergence of CARF and the growing adoption trajectory of low-tax jurisdictions at varying stages, such as Switzerland, Cayman Islands, Bermuda, Luxembourg, British Virgin Islands, Jersey British Isles, and Singapore, it’s increasingly important for businesses to be VASP (Virtual Asset Service Provider)-regulated and demonstrate full compliance with crypto asset regulations.
The CARF framework, developed by the OECD (Organisation for Economic Co-operation and Development), aims to set global standards for the reporting of crypto assets. This regulation is expected to be adopted by numerous offshore jurisdictions, further strengthening focus on tax transparency, compliance, and reporting. Consequently, fiduciary firms, banks, and trusts must familiarise themselves with the following key points:
Types of Crypto Assets Covered by CARF
The CARF regulation is broad in scope, covering cryptocurrencies, stablecoins, NFTs (Non-Fungible Tokens), and even some DeFi (Decentralised Finance) instruments.
Obligations for Handling Crypto Assets
While wallet providers, exchanges, and crypto asset service providers are naturally required to collect and report relevant data, the regulation also extends to less obvious intermediaries, such as fiduciaries and trusts.
Information Within Scope of Reporting
The information within the scope of reporting largely includes transactional and customer-related data, including KYC (Know Your Customer) information, with the added requirement of a tax identification number. Additionally, details about the recipient and the CASP (Crypto-Asset Service Provider) must be reported.
Alignment with FATF and likely Push factor
While CARF regulations establish a broad framework for tax transparency, jurisdictions adopting CARF are increasingly likely to implement FATF’s (Financial Action Task Force) Travel Rule if they have not already. The perceived benefits of not adhering to FATF standards such as fostering a start-up-friendly environment., become largely irrelevant once CARF is in place. Under FATF, transactions exceeding $1,000 (or equivalent) fall within the scope of reporting, while CARF requires reporting on all transactions, regardless of value. Together, these regulations are complementary: CARF focuses on enhancing tax transparency and efficiency, whereas FATF prioritises combating money laundering (AML) and countering the financing of terrorism (CFT).
At Moneybrain, we are not concerned, as we are a VASP-regulated business. We meet all the requirements outlined in the upcoming regulations. Compliance is hardcoded into our technology, and transparency is central to our mission.