The Crypto-Asset Reporting Framework (commonly referred to as CARF) is a global initiative led by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes which is intended to promoted the automatic exchange of information between countries to tackle emerging tax evasion risks related to cryptocurrency and digital assets.
In a 2022 Impact Assessment:,[1] the European Commission stated that the lack of centralised control, pseudo-anonymity and digitalised nature of cryptocurrency gave rise to elevated tax evasion risks.
[1] A 2022 article in The Washington Post, highlighted similar problems in the US, indicating that even in 2014/5, more than 5 million people were trading cryptocurrencies, but fewer than 1,000 taxpayers included gains on their tax returns.
[3] In July 2023, the International Monetary Fund indicated that "crude estimates suggest that a 20 percent tax on capital gains from crypto would have raised about $100 billion worldwide amid soaring prices in 2021".
"[4] A more detailed working paper prepared by the IMF stated that "the distinctive feature of crypto, arising from its anonymity, is naturally thought of as a particularly low probability of detection and hence particular appeal as a device for evasion"[5].
[8] In early 2022, the OECD published a consultation on a proposed package of rules[9] called the Crypto-Asset Reporting Framework requesting comments from industry participants.
That report was subsequently adopted by the OECD in June 2023, and CRS and CARF together form the International Standards for Automatic Exchange of Information in Tax Matters.
That draft followed earlier media reports that the United States was working towards participation in CARF, which would see information collected from US-based exchanges and sent to tax authorities globally.
In respect of decentralized finance applications, the OECD rules apply where an entity or individual exercises sufficient control over the platform that they could comply with the due diligence and reporting requirements under CARF.
[9] That element was removed from the final rules reflecting the comments submitted by industry participants, a decision that was criticised by the Tax Justice Network.