Taxation and Regulation of Crypto-Assets and Related Frameworks

  1. General Challenges of Taxing Crypto-Assets

Crypto-assets—particularly cryptocurrencies like Bitcoin—pose significant tax challenges due to their decentralized nature, anonymity, and global reach. These features create opportunities for: 

  • Tax avoidance and evasion 
  • Money laundering 
  • Terrorist financing 

Adding to the complexity, there is no unified global definition of crypto-assets. Some jurisdictions treat them as property, while others view them as currency. Cryptocurrencies themselves are just one subset of crypto-assets, used primarily as digital currencies. 

  1. Tax Treatment and Country Approaches

Different countries apply different classifications and tax rules: 

  • United Kingdom (UK): Treats crypto-assets as property. Income from employment or mining is subject to income tax, while capital gains tax (CGT) applies to appreciation. 
  • Malta: Treats certain cryptocurrencies as fiat currency equivalents. 

Tax treatment often depends on how the asset is acquired or held (investment, mining, payment, etc.). Double tax treaties may not resolve conflicts, as jurisdictions classify crypto-assets differently. This highlights the need for clearer global guidance on: 

  • Determining income source 
  • Ensuring transparency 
  • Enhancing international cooperation 
  1. OECD Developments (2020–2023)

The OECD has taken several steps to address the taxation of crypto-assets: 

  • 2020 Report: Called for stronger legislation and global cooperation. 
  • March 2023: Released a consultation on the Crypto-Asset Reporting Framework (CARF). 

CARF moves beyond reporting only account balances or holdings. Instead, it introduces transaction-based reporting, covering even transfers to cold wallets or decentralized applications (dApps). It builds on the Common Reporting Standard (CRS) but adds specific due diligence and information-sharing requirements. 

  1. Key Components of CARF

CARF outlines a detailed framework: 

  • Reportable Transactions: 
  • Conversions of crypto to fiat or other crypto-assets 
  • Retail crypto payments 
  • Transfers between wallets 
  • Exclusions: 
  • Closed-loop crypto-assets 
  • Central Bank Digital Currencies (CBDCs) 
  • Reporting Entities: 
  • Crypto-Asset Service Providers (CASPs), including exchanges, brokers, and facilitators of reportable transactions 
  • Information Required: 
  • Personal details of users 
  • Transaction data 
  • Asset-specific information 
  • Due Diligence: 
  • Self-certifications by users 
  • Alignment with AML/KYC rules 
  • Re-certification every three years 
  • Implementation: 
  • Via a Multilateral Competent Authority Agreement (MCAA), similar to CRS. 
  1. CRS Review

After seven years, the Common Reporting Standard (CRS) is under review. Key proposals include: 

  • Expanding the scope to cover digital products like e-money and CBDCs. 
  • Aligning definitions with CARF to minimize duplication. 
  • Improving due diligence and usability for tax administrations. 

This alignment with CARF is intended to streamline global reporting and strengthen tax transparency. 

  1. EU DAC8 Proposals

The EU has proposed DAC8 to harmonize tax reporting of crypto-assets across member states: 

  • Extends automatic exchange of information (similar to DAC2 for CRS) to crypto-assets and e-money. 
  • Strengthens AML compliance within the EU. 
  • Public consultation took place in 2021, with proposals expected after 2023. 

The objective is clear: ensure fair tax compliance, efficient data sharing, and reduced compliance costs for businesses. 

  1. US Proposals

The United States is also tightening reporting obligations: 

  • Current law requires reporting of specified foreign assets worth more than $50,000. 
  • The FY2024 Budget proposes new rules for reporting foreign digital asset accounts. 
  • This would apply to accounts on foreign exchanges or service providers, effective for filings after December 31, 2023. 

Conclusion 

Crypto-assets are reshaping global finance, but they also expose gaps in existing tax systems. While countries are taking varied approaches, international organizations like the OECD and the EU are working to establish frameworks—such as CARF, revised CRS, and DAC8—to harmonize rules and reduce loopholes. 

The direction is clear: greater transparency, stronger reporting requirements, and closer international cooperation. Businesses and investors involved in crypto must prepare for a world where crypto-assets are no longer beyond the tax net, but firmly integrated into global compliance regimes 

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