On Wednesday, the UK government opened a consultation over its plans to adopt the Organization for Economic Co-operation and Development (OECD)’s Crypto asset Reporting Framework (CARF) and proposed amendments to the existing Common Reporting Standard (CRS2.0). The CARF was developed to address the rapid development and growth of the Crypto-Asset market and owing to concerns over the erosion of global tax transparency. The UK Treasury has projection that implementing the framework could result in tax revenues of £35M (~USD$45M) between 2026 and 2027 and £95M (~USD$121M) between 2027 and 2028.
OECD is a leading intergovernmental forum with over 38 member countries, that develops global standards for sustainable economic growth. The updated CARF is
designed to ensure the collection and automatic exchange of information on transactions in Relevant Crypto-Assets.
The framework consists of three parts:
Rules that can be transposed into domestic law in different jurisdictions to collect information from relevant Reporting Crypto-Asset Service Providers;
a multilateral competent authority agreement on automatic exchange of information pursuant to the framework and related agreements; and
an electronic format to be used by Competent Authorities for the purposes of exchanging CARF information and by Reporting Crypto-Asset Service Providers to report to tax authorities.
Under the framework, businesses providing exchange services in Relevant Crypto-Assets are considered Reporting Crypto-Asset Service Providers. The package has been agreed at an international level but includes ‘optional elements, and the practical implementation is not prescribed in detail’. The UK consultation thus addresses the details and invites comments on the proposed implementation in four parts:
CARF - the UK government’s approach to the optional elements;
CRS - 2 potential amendments, including new types of assets and provisions around operational improvement;
Domestic Reporting Rules - seeking views on requiring UK reporting entities to include UK residents’ information; and
Summary of consultation questions.
The amendments to the CRS2.0 framework would see the addition of a number of new financial assets, products and intermediaries, which offer alternatives to traditional financial products.
In late 2023, the Australian Government in a joint statement, also affirmed their intent to
work towards swiftly transposing the CARF into domestic law…to commence by 2027, subject to national legislative procedures.
Submissions are open until 29 May 2024 and the UK government is seeking views from diverse industry participants from stakeholders, Crypto Asset Service Providers, financial institutions to professional advisory firms. The rules are scheduled to come into effect in 2026 or 2027 at the earliest for crypto asset exchanges.
Written by Kelly Kim and Steven Pettigrove