Brothers, the facts may be this simple: cryptocurrency income will also be taxable by 2026.
In today's global context where governments are generally facing financial shortages, there is no region beyond the reach of tax authorities—crypto enthusiasts should have no illusions.
This article compiles key questions and information related to CARF.
CARF Mechanism:
The Crypto-Asset Reporting Framework (CARF) is a global tax information automatic exchange standard released by the Organisation for Economic Co-operation and Development (OECD) in 2022, specifically targeting cryptocurrency transactions.
It is regarded as an extension and supplement to the existing OECD 'Common Reporting Standard' (CRS) for tax information exchange, aiming to address the gap in traditional CRS regarding unreported cryptocurrency transaction information.
CARF requires countries to include crypto asset service providers (such as exchanges, wallet custodians, brokers, etc.) in the reporting system, obtain users' identity and tax residency information through due diligence, and submit annual reports on users' crypto asset transaction activities.
CARF Scope:
Any reporting crypto-asset service provider (Reporting Crypto-Asset Service Providers) with sufficient nexus (connection) in a CARF-adopting jurisdiction must comply with unified due diligence and reporting rules.
This means that major centralized exchanges (such as Binance, OKX, Bybit, Coinbase, etc.) must collect relevant user account information—including identity details, taxpayer identification number (TIN) or tax number, tax residency status, and transaction and asset details across all accounts on the platform—once their country or region implements CARF.
CARF Exchange Content:
Exchange transactions between crypto assets and fiat currency (Crypto-Asset-to-Fiat) require reporting the total amount of fiat currency bought or sold (used to identify acquisition cost or sale proceeds).
Exchange transactions between crypto assets (Crypto-Asset-to-Crypto-Asset) require reporting the value of the disposed and received crypto assets (converted into fiat currency). In practice, such transactions are split into two reporting entries: one for the disposal of crypto asset A (income calculated at market value at disposal), and another for the acquisition of crypto asset B (expense calculated at market value at acquisition).
Transfers of crypto assets (Transfers), including withdrawals to non-custodial wallets (wallets without third-party custody), etc. Exchanges must report the number of times and total amount transferred to wallet addresses not linked to any licensed entity, to increase tax authorities' visibility into users' self-custody asset flows. If tax authorities have concerns, they can further request relevant wallet address details through existing information exchange channels.
Specific transaction identification: Exchanges should, where possible, label certain special types of transfers, such as airdrops, staking income, loan interest or repayments, to help tax authorities understand the nature of the transaction. For example, if income earned in an Earn/Staking account can be identified as staking rewards, exchanges should classify it as 'staking income' for reporting purposes.
CARF Exchange Process:
1. User Information Collection:
Exchanges collect users' identity and tax residency information (typically obtained through tax residency self-declarations during KYC processes) and track and record users' various crypto transaction data throughout the year.
2. Local Reporting:
Exchanges report the above information annually to the local tax authority. For example, after Singapore commits to implementing CARF, exchanges must file users' crypto transaction data with Singapore's IRAS.
3. International Exchange:
Tax authorities will bundle the portion of declared data related to foreign tax residents and automatically transmit it to the relevant counterpart jurisdictions via the OECD multilateral mechanism. Information exchange only occurs when both parties have signed the CARF exchange agreement and confirmed the other party as a 'reportable jurisdiction'. For example, the UK's HMRC will send data on non-UK tax resident users to their country of residence (provided that the destination country has also implemented CARF and has an exchange relationship with the UK).
4. Data Application:
After receiving the data, the receiving country's tax authority can compare it with taxpayers' declarations to detect unreported crypto asset gains, and use it for taxation or recovery purposes. Since CARF is part of international tax information exchange agreements, the exchanged information is used solely for tax purposes and is protected by strict confidentiality and data security protocols.
CARF Implementation Timeline:
1. United Kingdom: The regulation takes effect on January 1, 2026, with exchanges starting data collection; first data exchange in 2027, as one of the initial participating countries, with mandatory registration and penalties for non-compliance;
2. Japan: Reporting and data collection required starting in 2026; first data exchange in 2027, among the initial 48 jurisdictions, used for overseas crypto account taxation management;
3. South Korea: Data collection by exchanges starts in 2026; first data exchange in 2027, participation in rule-making, delayed crypto tax legislation does not affect the CARF process;
4. Hong Kong, China: First data exchange in 2028, confirmed by the HKSAR government's announcement on advancing the process;
5. Singapore: First data exchange in 2028, IRAS clearly aims to prepare between 2027–2028;
6. UAE: First data exchange in 2028, has committed to participation, meets G20/OECD requirements, and aims to maintain its status as an international financial center;
7. United States: First data exchange in 2029, followed by further implementation and data collection;
8. China: The situation is particularly unique. Since 2017, domestic regulators have prohibited the operation of crypto exchanges within China, recognizing that cryptocurrencies like Bitcoin have no legal tender status and are not considered lawful circulating currencies.
In 2021, the People's Bank of China and other departments further announced that all crypto-related activities are illegal financial activities.
Therefore, Mainland residents will temporarily not trigger CARF automatic exchange: Since China has not joined the CARF network, other countries will not automatically exchange transaction data of Chinese tax residents with Chinese tax authorities.
If a user does not have any other tax residency (for example, has not obtained tax residency in a CARF country), the CARF framework currently cannot reach them.
However, in today's global context where governments are generally facing fiscal shortages, there is no region beyond the reach of tax authorities—do not entertain any illusions.
Tax exemption is impossible; a more rational approach is to find a tax-friendly jurisdiction and become a tax resident there, for example—Hong Kong.