In December 2025, Hong Kong officially released the CARF consultation document, which is the cryptocurrency version of CRS. The only purpose is to make cryptocurrency assets completely transparent and combat cross-border tax evasion.
Hong Kong plans to collect cryptocurrency asset information starting in 2027 and will begin global ledger exchange in 2028.
Explaining several questions of concern to everyone
Q: Blockchain is decentralized, and cryptocurrencies are encrypted, so why can they be real-named?
A: Blockchain is indeed decentralized, but the 'entry and exit' points for buying and selling coins (exchanges, custodians, ATMs, etc.) are managed by institutions. During the KYC process when opening an account, identity information will be collected.
It's about real-name verification; there's no need to break through blockchain technology, but it's enough to require service providers to report!
CARF, which stands for the Crypto Asset Reporting Framework, is essentially the crypto version of CRS, focusing on two main tasks: First, mandatory real-name reporting; the Hong Kong tax bureau requires exchanges, wallet providers, and other institutions to report user identity information, trading, exchange, and large consumption records to the tax bureau. Second, participating countries and regions form a working group to exchange collected data once a year. (Currently, 48 countries and regions have joined!) The aim is to combat cross-border tax evasion.
Q: Who is obligated to report? Which institutions are defined as 'crypto asset service providers required to report' (RCASP)?
A: According to the (consultation document), it mainly involves service providers executing exchange transactions, including parties or intermediaries involved in related exchange transactions or entities providing trading platforms (including blockchain-based decentralized platforms). In simple terms, it's cryptocurrency service providers, such as traders of related crypto assets, brokers, operators of crypto asset ATMs, crypto exchanges, and individuals or entities that subscribe to assets from issuers to resell to customers.
Q: Which crypto assets will be monitored and exchanged?
A: Including fungible tokens and non-fungible tokens (NFTs). Basically, anything you've heard of is included, such as Bitcoin, Ethereum, and other cryptocurrencies, stablecoins like USDC and USDT, non-fungible tokens, and derivatives. The only exceptions are central bank digital currencies (CBDCs), specified electronic currency products, and assets that are clearly determined not to be usable for payment or investment purposes. It's not that they are not exchanged, but they are included in the CRS exchange scope.
Q: What transactions need to be reported?
A: Mainly three types: First, the exchange between relevant crypto assets and fiat currency. Second, the exchange between one or more relevant crypto assets. The transfer of relevant crypto assets, including airdrops, staking rewards, mining rewards, crypto loans, and income from the sale of goods or services, etc. Third, retail payment transactions; retail payment transactions exceeding $50,000 need to be reported separately.
Q: How do service providers identify the identity of crypto asset users?
A: RCASP mandates users to provide 'self-certification' to identify their tax identity. New users must fill this out when opening an account, and existing users must rectify within 12 months of implementation. If it is a shell company (non-active entity), the identity of the actual 'controller' behind it must be verified.
Q: What legal consequences will there be for not complying with reporting regulations?
A: To ensure the effective implementation of the reporting framework, the Hong Kong government suggests introducing strict penalties, mainly targeting non-cooperation with mandatory registration, providing false or inaccurate information, etc. Specific penalties are still under discussion.
Q: How much tax do I have to pay?
A: CARF does not directly collect tax; the exchange is to allow tax authorities to understand how much individual residents and enterprises have in crypto asset scale, how much they have earned, and whether there is any tax evasion. Tax authorities in various countries hope that everyone will report voluntarily.
Q: When will CARF be implemented?
A: It has already begun; 48 countries and regions, including the UK, Japan, and the EU, officially started collecting transaction data on January 1 of this year, with the first global exchanges starting in 2027. Hong Kong is currently in the legislative improvement stage, clearly planning to start collecting data in 2027 and officially exchange in 2028. Although our country has not yet announced a timeline, if Hong Kong adopts a broad-spectrum law for collection, meaning 'record first, exchange later': as long as the user is not a Hong Kong resident, user data will be stored in the backend 'archive' from 2027.