As cryptocurrencies become increasingly widespread globally, regulations are expanding at a comparable pace. Despite Bitcoin experiencing challenging times, significant developments are happening in the background. Trump’s team may join the Common Reporting Standard for Automatic Exchange of Financial Account Information (CARF), aiming to optimize crypto tax reporting.
Understanding the Crypto Asset Reporting Framework (CARF)
Amid heightened investor losses, the exact taxation they face remains uncertain. However, should the market experience an upswing, the IRS is eager to fulfill its role. The Trump administration may consider endorsing rules that enable the U.S. Internal Revenue Service to access reports on foreign crypto accounts.
According to an official announcement, the Treasury Department’s proposed rules for international crypto tax reporting collaboration reached Trump’s team on Friday. The President’s advisors will review these proposals. By early 2025, the White House seeks to examine rules facilitating the U.S.’s participation in the Crypto Asset Reporting Framework (CARF).
Initiated by the Organization for Economic Cooperation and Development in 2022, CARF aims to prevent tax evasion by automatically sharing information about citizens’ crypto assets. This global agreement was established following the bull markets of 2021.
“CARF facilitates the automatic exchange of tax information regarding crypto assets. It addresses the rapid growth of the crypto asset market and ensures recent gains in global tax transparency are not eroded.” – OECD
Implications of Crypto Taxation
Countries like Japan, Germany, France, Canada, Italy, the United Kingdom, UAE, and Singapore have signed the CARF agreement. Although it’s a positive step towards normalizing and globally accepting cryptocurrencies, global taxation can be concerning for individual investors. Most countries have yet to establish standards in this area.
A summer report from the White House stated:
“Implementing CARF will promote the growth and use of crypto assets in the U.S. It will address concerns about potential disadvantages for the U.S. or U.S.-based crypto exchanges due to a lack of reporting programs.”
While the White House calls for the Treasury and IRS to consider CARF, it hesitates to include DeFi transactions in the new reporting requirements.
With CARF planned for global implementation in 2027, the U.S. still has time. However, it seems Trump is poised to support this agreement to enhance the effective taxation of cryptocurrencies.