The Crypto-Asset Reporting Framework (CARF) is the most significant international initiative for tax transparency on digital assets to date. Developed by the OECD and endorsed by the G20, CARF sets a global standard for the automatic exchange of tax information on crypto-asset transactions between countries.
As of December 2025, more than 75 jurisdictions have committed to CARF, with data collection starting January 1, 2026. The United States is reviewing proposals to join, which could change reporting requirements for American taxpayers with foreign cryptocurrency holdings.
Part I: What Is CARF?
CARF requires Crypto-Asset Service Providers (CASPs) to collect, verify, and report user transaction data to domestic tax authorities. These tax authorities then automatically exchange this data with other jurisdictions where users are tax residents.
Who Must Report?
- Centralized exchanges (Coinbase, Binance, etc.)
- Custodial wallet providers
- Crypto ATM operators and payment processors
- Certain DeFi protocols and brokers
What Is Reported?
- Identity: Name, address, date of birth, Tax ID (TIN), tax residence.
- Transactions: Acquisitions, disposals, transfers, and gross proceeds.
- Holdings: Aggregate fair market value of assets and year-end balances.
Implementation Timeline
- Jan 1, 2026: Data collection begins (EU, UK, Canada, Japan, etc.).
- 2027: First automatic exchange of information between tax authorities.
- 2027-2028: Second wave of countries (Singapore, UAE, Hong Kong) join.
Gain Control Over Your Digital Asset Taxes
As digital asset reporting requirements become standard, taxpayers face mounting challenges in accurately tracking the cost basis of their crypto holdings. Whether you’re a long-term holder, an active trader or a DeFi participant, Withum’s crypto-savvy advisors can help you stay compliant and optimize your tax position.
Part II: Why Does CARF Exist?
CARF aims to close the transparency gap. Crypto’s pseudo-anonymity and cross-border mobility created a “blind spot” for tax enforcement. Traditional reporting (like CRS for banks) didn’t cover crypto, allowing taxpayers to hide assets offshore. Its key policy goals are to:
- End Tax Evasion: Prevent users from hiding wealth in foreign wallets.
- Level Playing Field: Ensure centralized exchanges and offshore platforms face similar reporting rules.
- Revenue Protection: Secure tax revenue as crypto adoption scales.
Part III: The U.S. Path To CARF
The United States has not formally adopted CARF and is reviewing a Treasury proposal to join. A decision is expected in early 2026, but the U.S. is likely to join for two reasons:
- Reciprocity: The U.S. wants data on American taxpayers using foreign exchanges. To get it, the U.S. must share data on foreign users of U.S. exchanges.
- Competitiveness: U.S. exchanges are already subject to Form 1099-DA rules starting in 2026. CARF forces foreign competitors to adopt similar standards, reducing their regulatory advantage.
If implemented, CARF data would enable the IRS to identify offshore tax evasion with precision, much like FATCA for bank accounts. It would impact U.S. taxpayers as follows:
- Foreign Accounts: If you use a non-U.S. exchange, it will likely report your activity to the IRS starting in 2027/2028.
- Domestic Accounts: U.S. exchanges will report foreign users to their home countries.
Part IV: Key Takeaways for Taxpayers
- Offshore secrecy is ending: Foreign exchanges will report your activity to the IRS. The hide-it-offshore strategy is obsolete.
- Compliance is Critical: Review past returns for accuracy and completeness. If you’ve underreported, consider voluntary disclosure before CARF data exchanges begin.
- Consolidate: Managing tax reporting across multiple foreign jurisdictions will become complex. Consolidating holdings can simplify compliance.
- DeFi Uncertainty: While decentralized protocols are technically covered, enforcement logistics remain unclear. Expect evolving guidance.
CARF signals the end of the unregulated era of crypto taxation. By 2027, tax authorities worldwide will have visibility into cross-border crypto activity. Proactive compliance will be essential for investors and businesses.