The remarkable progress of crypto-assets and the tokenization of the economy since the emergence of Bitcoin, back in 2008, has led to different regulations being issued around the world. They seek to provide transparency, protect consumers, and combat tax fraud and crimes such as money laundering and terrorist financing, as summarized below.

1. CRAF – OECD Crypto – assets reporting framework 

Many jurisdictions have already established reporting regimes where virtual asset service providers (VASPs) are required to report on transactions. However, the big limitation for states is that they only have the power to require subjects residing in their jurisdictions to report operations with cryptoassets.

In short, the problem is that they do not have information about operations conducted through VASPs located abroad.

Therefore, in March 2022, the OECD proposed the CARF (Reporting Framework for Crypto-Asset Operations).

The CARF creates a standardized international system for the collection and exchange of data related to cryptocurrency transactions.  It is essentially the crypto version of the Common Reporting Standard (CRS), but adapted to the unique, often anonymous world of blockchain-based finance.

Unlike the CRS, which focuses mainly on traditional financial institutions, the CARF targets VASPs, decentralized platforms, brokers and even certain wallet providers.

The CARF will cover crypto-assets that can be held and transferred in a decentralized manner, without the intervention of traditional financial intermediaries, including stablecoins, derivatives issued in the form of crypto-assets and certain non-fungible tokens (NFTs).

Excluded from the definition are central bank digital currencies (CBDCs), which function similarly to money held in a traditional bank account and will therefore be included within the CRS.

The definition of crypto-assets is based on the FATF recommendations, to ensure due diligence requirements of intermediaries (AML/KYC).

The following four types of relevant transactions will be reportable under the new framework:

• Exchanges between crypto-assets and fiat currencies.
• Exchanges between one or more forms of cryptoassets;
• Reportable retail payment transactions.
• Transfers of crypto assets.

This is not just another regulation. The CARF is setting the tone for global tax transparency in cryptocurrencies, by producing real-time reports to tax authorities and removing anonymity, as users who were previously anonymous to tax authorities will now be subject to identity verification.

The CARF is designed for international cooperation, in particular to track funds moving across borders and evading local taxes, where the greatest losses of tax revenue occur.

This framework is likely to increase trust among regulators, which could incentivize wider adoption of crypto assets by institutional actors.

2. Jurisdictions that will enforce the CARF

The list of jurisdictions committed to the implementation of the CARF has been updated. These are classified according to the target year for the start of the exchanges:

Jurisdictions to conduct the first exchanges in 2027 (52):
Austria, Azerbaijan, Belgium, Bermuda, Brazil, Bulgaria, Canada, Colombia, Croatia, Cyprus, Cayman Islands*, Czechia, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Guernsey, Iceland, Indonesia, Ireland, Isle of Man, Israel, Italy, Japan, Jersey, Kazakhstan, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, San Marino, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Uganda, United Kingdom.

Jurisdictions to conduct the first exchanges in 2028 (15):
Bahamas, Barbados, British Virgin Islands, Costa Rica, Hong Kong (China), Malaysia, Mongolia, Nigeria, Saint Vincent and the Grenadines, Seychelles, Singapore, Thailand, Turkey, United Arab Emirates and the United States.

Jurisdictions identified by the Global Forum as relevant to the CARF that have not yet committed to implementing it (7):
Argentina, Australia, El Salvador, India, Panama, Philippines and Vietnam.

3. DAC 8 the European Union 

The directive was adopted by the EU Member States and entered into force on November 13, 2023.

It complements the CARF of OECD by providing an update of existing CRS legislation and cross-border information exchange.

EU member States have until December 31, 2025 to transpose the new rules into national law, and the first application of most of the provisions will be from January 1, 2026.

4. FATF regulations

The revised FATF Recommendation 15 requires VASPs to be regulated for the purposes of combating money laundering and terrorist financing, to be licensed or registered, and to be subject to effective monitoring or supervision systems.

For its part, Recommendation 16 of the “Travel Rule” establishes that countries should ensure that financial institutions include accurate information about the originator and the beneficiary in electronic transfers, and that this information remains throughout the entire payment chain.

They should also monitor electronic transfers to detect those that lack the required information, and take appropriate measures.

5. MiCA (Market in Crypto – assets) EU regulation 

This is a historic agreement for the bloc of EU countries, which basically aims to set limits on the crypto-asset market, protect consumers and demand transparency from legally operating services.

It seeks to ensure that transfers of crypto assets, like any other financial operation, can always be traced, and that suspicious transactions are blocked.

The so-called ”Travel Rule” will cover crypto asset transfers in the future. The information about the origin of the asset and its beneficiary will have to “travel” with the transaction and be stored both at the origin and at the destination.

Those crypto-assets that can be qualified as financial instruments will be subject to the existing regulation in the matter.

Financial instruments and NFTs are excluded from its scope, unless they can be considered security tokens or other related tokens. Complex phenomena such as DeFi (Decentralized Finance) and DAOs ( Decentralized Autonomous Organizations) are also left out.

According to the new rules, VASPs will have to meet stringent requirements to protect consumers’ wallets and will be liable in case of loss of crypto assets.

MiCA entered into force on June 30, 2023, and its application began progressively, with a transition period.

The regulation will also have a significant impact on the taxation of crypto-assets in the European Union, by facilitating tax supervision and unifying criteria.

6. New anti-money laundering regulation (AMLR) in the EU

This regulation will prohibit anonymous accounts and privacy tokens. VASPs will be under the direct supervision of the Anti-Money Laundering Authority (AMLA), which will increase control over transactions.

This framework seeks to strengthen the fight against money laundering and illicit financing, but also raises concerns about privacy and the impact on the crypto ecosystem.

7. The impact of all these regulations

All these regulations imply greater fiscal transparency and contribute to the detection and combat of crimes such as money laundering and terrorist financing.

The tax authorities will have greater tax control, since operations with cryptoassets will have to be reported. This entails greater regulatory compliance obligations for the actors involved.

Among the criticisms, concerns about the loss of anonymity, regulatory pressure on VASPs and the cost of implementation stand out.

The positive impacts include:

• Unification of legal criteria, favoring certainty and taxation.
• Greater protection for consumers against fraud.
• Prevention of financial crimes through the “Travel Rule” and the CARF, which together create a robust financial audit trail.

The great challenge will be to promote innovation with new business models based on tokenization, while ensuring transparency and citizen protection. In a world of rapid evolution and offshoring, this balance will be key to the success of the regulations.

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