The First Global Crypto Tax Reporting Framework

Marking an important development for crypto and global tax reporting, on October 10, the OECD finalized its Crypto-Asset Reporting Framework (CARF) for the automatic exchange of tax information on crypto transactions. The intergovernmental body – composed of 38 member countries with the mission to stimulate economic progress and world trade – also amended and aligned its existing rules under the Common Reporting Standard (CRS) for the exchange of information on financial assets. These updated rules clarify reporting obligations for the crypto economy and will help integrate digital assets into the broader world of financial services.

The OECD released a public consultation document in March 2022, and the final version released today considers comments submitted by over 80 individuals and firms including Coinbase. CARF provides clarity on crypto tax reporting rules pertaining to four pillars: 

• Crypto-Assets in Scope

• Intermediaries Subject to Reporting

• Information to be Reported, and 

• Taxpayer Documentation Requirements

Crypto Assets in Scope

• Crypto assets in scope are those that can be used for payments or investment purposes.  

• Crypto assets exempted from reporting requirements include closed-loop assets, Central Bank Digital Currencies, non-fungible tokens (unless they can be used for payments or investments) and certain specified electronic money products. 

• Contrary to expectations, non-fungible tokens (NFTs) may be pulled back into scope though if they are traded on an online marketplace.

Intermediaries Subject to Reporting

• Reporting is required from entities or individuals that as a business enable and execute crypto asset transactions, such as centralized exchanges, broker dealers in relevant crypto assets, and operators of crypto atms. Certain decentralized exchanges may be required to report relevant crypto asset transactions.

Information to be Reported

• Reporting requirements include annual aggregate transaction information by crypto asset type on crypto-to-crypto and crypto-to-fiat exchanges, transfers of relevant digital assets, including transfers to un-hosted wallets, and customer information related to certain high-value (greater than USD $50k) retail payments in crypto processed on behalf of merchants.

Taxpayer Documentation Requirements

• Due diligence procedures will be implemented that build on the self-certification requirements under CRS and FATF, for the purpose of identifying and verifying crypto asset users’ tax residence and identity. 

What’s Next 

The OECD will continue working with major crypto economy participants and OECD countries to ensure consistent domestic and global application of CARF. This includes working with the European Union and the UK. As with CRS, we expect CARF to be implemented globally, with the only exception being the US (more detail below). Local tax jurisdictions will need to adopt the CARF framework and build IT solutions to support data submissions and exchanges prior to implementation. For that reason, we expect these rules to be phased in over the next few years.

We were not expecting NFTs, particularly collectibles, to be included under these rules.   And, while there is alignment of CARF with the broader FATF (Financial Action Task Force) definition of assets within scope, thereby providing symmetry among tax and anti-money laundering rules, the final CARF guidelines buried an additional claw back of NFTs as reportable to the extent they are traded on a marketplace.  Coinbase believes that including non-financial assets, such as NFTs, in the financial reporting rules is misplaced and overbearing.  It also departs from established tax reporting principles related to online marketplaces for goods and services.

It’s important to note that CARF is not expected to apply to the US. The US government will develop its own reporting regime under the Infrastructure Investment and Jobs Act passed in 2021. Coinbase is looking forward to reasonable and balanced US tax rules regarding digital asset reporting from the IRS.

Coinbase recognizes that taxes are a reality in a modern society and that the crypto economy will need to develop tax solutions that balance compliance with privacy, efficiency, and transparency. We look forward to continuing our efforts and collaboration with the OECD and the US Treasury to ensure that tax rules are applied fairly and on a level playing field for the entire industry.