On Friday 10 November, around 50 countries, including Switzerland, Liechtenstein, Germany and the USA, issued a joint declaration regarding the further development of the Automatic Exchange of Information (AEOI) regarding crypto assets. The signatory states are committed to the adjustments to the Common Reporting Standard by the OECD (CRS) and to the introduction of the Crypto-Asset Reporting Framework of the OECD (CARF). According to the joint declaration, the CARF and the CRS adjustments are to be introduced on January 1, 2026 at latest. The first reporting under the CARF is to take place in 2027 for the reporting period 2026.
The planned amendments to the AEOI include clarifications and tightening of the existing CRS rules as well as certain innovations associated with the implementation of CARF. In our opinion, certain additional information to be reported will require sufficiently early implementation in the banking/client relationship systems of financial institutions. Further, some investment entities investing in crypto assets will become a reporting Financial Institution under the amended CRS rules, as certain crypto assets will be defined as financial assets within the amended CRS rules.
The CARF is intended to achieve transparency with respect to crypto assets transactions through the annual, automatic exchange of crypto assets transaction information among the participating jurisdictions whose tax residents hold or engage in crypto transactions.
CARF therefore imposes new client due diligence and reporting requirements on all crypto assets service providers. A crypto assets service provider in the sense of CARF is every person that as a business effect Crypto-Asset transactions or make available a platform for such transactions for or on behalf of a customer. This includes also crypto asset exchanges or wallet providers.
The OECD has intentionally defined the term “Crypto-Asset” very broad to capture a variety of digital asset types, including future asset types that function in a similar manner.
According to the OECD CARF, a crypto asset means a digital representation of value that relies on a cryptographically secured distributed ledger or a similar technology to validate and secure transactions. From this very broad definition certain types of crypto assets are excluded from reporting. Excluded are in particular Central Bank Digital Currencies, Specified Electronic Money Products and any crypto assets for which the Reporting Crypto Asset Service Provider has adequately determined that it cannot be used for payment or investment purposes. Examples of digital financial assets captured by CARF include stablecoins, derivatives issued as a crypto assets, and certain non-fungible tokens (NFTs).
Unlike CRS, CARF will be a transactional reporting regime. The OECD defined the three types of transactions subject to reporting.
- Exchanges between relevant crypto assets and fiat currencies
- Exchanges between one or more forms of relevantcrypto assets, and
- Transfers (including retail payment transactions) of relevant crypto assets (subject to a de minimis)
The introduction of CARF particularly affects those institutions that have not yet been classified as reporting financial institutions under CRS but will be considered Crypto Asset Service Providers in the future. However, banks that offer relevant crypto services may also be affected by CARF and might have to set up a second reporting regime.
It is worth mentioning that also the US has signed the joint declaration with regard to the CARF.
The next step will be that the jurisdictions who have signed the joint declaration will start drafting the local implementation law. Switzerland communicated that they intend to release the local implementation law as a draft for consultation in Summer 2024.
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Matthias Staubli
