Canada is set to adopt the international Crypto-Asset Reporting Framework (CARF) by 2026, one year earlier than the global commitment made by 47 countries to implement the standard by 2027.
This initiative, highlighted in a supplement to Canada’s 2024 annual budget, aims to enhance transparency and compliance within the cryptocurrency sector.
New Reporting Requirements for Crypto Asset Service Providers
Under the CARF, crypto asset service providers (CASPs), including cryptocurrency exchanges, brokers, dealers, and ATM operators, will face stringent new reporting obligations.
These entities will be required to report transactions involving crypto-to-fiat and crypto-to-crypto exchanges, as well as any crypto asset transfers exceeding $50,000 USD.
Additionally, CASPs will need to collect and report detailed customer information, such as names, addresses, dates of birth, and taxpayer identification numbers for each jurisdiction of residence.
Scope and Exemptions of the CARF
The reporting framework will apply to both CASPs operating in Canada and Canadian residents engaging in significant crypto transactions, regardless of whether the CASPs are based domestically or internationally.
Notably, the CARF does not cover central bank digital currencies and digital representations of fiat currencies like stablecoins, which are instead governed by amendments to the OECD’s Common Reporting Standard (CRS).
International Cooperation and Data Sharing
Reflecting the collaborative spirit of the CARF, the information gathered under these regulations will be shared internationally among tax authorities to ensure compliance and prevent tax evasion.
The framework was developed by the Organisation for Economic Cooperation and Development (OECD) and endorsed by the G20 finance ministers and central bank governors in October 2022.
By moving to implement the CARF by 2026, Canada positions itself as a proactive leader in regulating the crypto landscape.
This early implementation underlines Canada’s commitment to aligning with global standards and enhancing the integrity of its financial system in the face of rapidly evolving digital asset markets.
