Introduction
The OECD’s Crypto-Asset Reporting Framework (CARF) is already reshaping global expectations around crypto tax compliance. But as countries begin implementing the framework, the real burden lies in the operational details—who reports, what gets reported, and how edge cases like DAOs, non-custodial platforms, and wrapped assets are treated.
This post builds on the Veritas Global primer on CARF, offering a more focused explainer on how the OECD’s official FAQ (released in September 2024) translates into risk and compliance responsibilities for crypto platforms, fintech teams, and legal counsel.
More than 50 countries have already signed the CARF-MCAA, including Singapore, France, Germany, and the Cayman Islands. You can view the full list of signatory countries on the OECD’s tax information exchange portal.
1. Branch Nexus Means Full Entity Reporting
If your company operates through a branch in a CARF-participating jurisdiction, you may assume that only transactions through that branch are reportable.
According to the OECD, that is incorrect.
Where the highest nexus to a CARF jurisdiction is a branch, the Reporting Crypto-Asset Service Provider (RCASP) must report all transactions of the entity globally—not just those conducted via the branch—unless another branch in a different CARF country holds a stronger connection.
Implication: U.S.-based or offshore platforms with technical teams or offices in CARF jurisdictions (e.g., Singapore, France, Bahamas) may be subject to entity-wide CARF reporting, even if they believe their exposure is limited to local transactions.
2. Retail Payment Transactions Are Broadly Defined
CARF imposes reporting obligations for retail payment transactions exceeding USD 50,000 per year per customer. These arise when crypto-assets are transferred by the RCASP to a merchant on behalf of a user.
The FAQ clarifies:
- If the platform acts on behalf of the customer, it must report retail payments exceeding the threshold as a separate transaction category.
- If the platform acts on behalf of the merchant, it is not considered a retail transaction unless AML rules require identifying the merchant’s customer—in which case the obligation is reinstated.
Implication: Payment processors facilitating crypto-based commerce must monitor total annual flows per customer. If your platform handles both merchant-side and consumer-side rails, dual obligations may apply.
3. Reporting for Partnerships and DAOs Without Tax Residence
Entities such as DAOs, partnerships, and LLPs often lack traditional tax residency. The FAQ confirms that in such cases, platforms may default to the principal office address to determine jurisdiction for CARF purposes.
Implication: If your crypto protocol uses a DAO structure but operates from a central development team in a CARF country, your protocol may trigger full tax reporting obligations based on that nexus. Legal wrappers do not provide exemption.
4. Non-Custodial Platforms Are Not Exempt
CARF applies to platforms that facilitate exchange transactions—whether or not they hold custody.
The FAQ makes this explicit: a Reporting Crypto-Asset Service Provider includes any platform effectuating exchange transactions, even if those services are non-custodial.
Implication: AMMs, liquidity protocols, and smart contract frontends that route trades are within scope. If your protocol allows crypto-to-crypto or crypto-to-fiat swaps on behalf of users, CARF applies.
5. Wrapping and Liquid Staking Are Treated as Exchanges
Many projects assume that wrapping a token (e.g., converting ETH to wETH) or liquid staking does not constitute a reportable event. Under CARF, this is incorrect.
The FAQ clarifies that:
- Wrapping, cross-chain tokenization, and liquid staking mechanisms that return a tokenized receipt all qualify as Exchange Transactions, regardless of whether the economic value changes or tax law treats it as a disposition.
Implication: Any feature that converts tokens or issues synthetic assets must be recorded and reported—even if the transaction is designed to preserve value parity or enable smart contract functionality.
6. Collateralized Loans and Crypto Lending
The OECD outlines how to report crypto-backed loans, including use of assets as collateral and repayment terms.
CARF requires:
- Transfers involving collateral posting or return to be tagged as “Collateral”
- Loans and repayments of borrowed crypto to be tagged as “Crypto Loan”
- Additional compensation (such as yield) to be tagged as “Other”
Implication: Lending protocols and wallets must clearly distinguish between loans, collateral, and income events. Failure to do so may result in misreporting and compliance gaps.
What Founders and General Counsel Should Do Now
1. Review all product flows for “Exchange” mechanics.
Wrapping, staking, routing, and tokenized vaults may all qualify under CARF. Don’t assume non-taxable equals non-reportable.
2. Map operational nexus by team and infrastructure.
Even if incorporated offshore, developer activity or business presence in a CARF jurisdiction may trigger global reporting obligations.
3. Align due diligence systems.
For DAOs and other pass-through entities, ensure principal office or management address is captured and recorded during onboarding.
4. Implement tagging for complex transactions.
Your backend must distinguish “Crypto Loan,” “Collateral,” and “Other” per CARF categories.
5. Educate compliance, product, and engineering teams.
CARF touches operations, not just legal. Non-custodial platforms and token engineering teams need clear guidance on what’s reportable and why.
Conclusion: CARF Compliance Requires Engineering, Not Just Policy
The OECD’s FAQ on the Crypto-Asset Reporting Framework makes one thing clear: technical decentralization does not create legal distance. The scope of CARF is broad, its definitions precise, and its implementation timeline active.
For general counsel, that means advising on entity structuring, documentation standards, and cross-border data obligations. For founders, it means building systems that treat tax reporting as a core infrastructure layer—not a year-end scramble.
Need help operationalizing CARF across your fintech or Web3 product?
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