48-nation bloc to crack down on using crypto assets to avoid tax

Cryptocurrency has proven a disappointing alternative to fiat currency, a poor alternative to conventional securities, and a lousy store of value. But it has helped plenty of people to launder money and avoid taxes.

Come 2027, 48 nations hope to reduce its effectiveness in those roles, through a standard: the Crypto-Asset Reporting Framework (CARF).

Developed by the Organisation for Economic Co-operation and Development (OECD), the CARF was developed under the 168-member Global Forum on Transparency and Exchange of Information for Tax Purposes, with the G20 and the Organisation for Economic Co-operation and Development looking on approvingly and lending a hand.

As the name implies, that Forum is all about sharing data so that each nation's tax authorities have the information they need to understand money movements and make sure they can see what they're allowed to tax. The Forum and the legislative instruments it has fostered include reporting requirements that ensure relevant information is collected by those who facilitate transactions and will be shared.

CARF brings similar reporting requirements to crypto assets.

Note the term "crypto assets". That's important, because cryptocurrency is not the only blockchain-based instrument that worries authorities.

Some, like non-fungible tokens, rely on the same "greater fool" theory that pumped up cryptocurrency prices, and can attract - ahem - interesting investors.

But others are far less contentious or speculative, and instead aim to speed transaction processing. Stablecoins, for example, are often suggested as a means for faster and cheaper cross-border transactions than is possible with dominant transaction processing services. Tokenized assets can also be more easily integrated into applications to ease automated money movements.

That speed and flexibility is increasingly appreciated. But unless transactions made with those instruments can be observed, the potential for their use to evade tax authorities is high.

CARF's use of the term "crypto assets" therefore signals an effort to cover the weird world of cryptocurrencies and the emerging classes of classier tokenized assets.

The Framework was signed off in March 2023, and in the time since OECD members and other interested nations have been dotting the Is and crossing the Ts to prepare for its implementation.

Last Friday 48 nations set 2027 as the deadline by which they will have implemented CARF in their laws and be ready to have their local crypto asset exchanges and other relevant players sharing data.

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A 139-page paper detailing the Framework can be found here in several file formats.

The 48 nations that have agreed to adopt CARF are Armenia, Australia, Austria, Barbados, Belgium, Belize, Brazil, Bulgaria, Canada, Chile, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Netherlands, Norway, Portugal, Romania, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, the United Kingdom, and the United States of America, along with the Crown Dependencies of Guernsey, Jersey, and Isle of Man, and the United Kingdom's Overseas Territories of the Cayman Islands and Gibraltar.

You may notice that several known tax havens made the above list. A few others didn't sign up, meaning CARF won't completely crush crypto's role as a means for moving messy money.

Just like every other attempt to stop tax avoidance and money laundering. ®