CRS 2.0 and CARF: shaping global tax transparency in a digital age 

The OECD's CRS 2.0 and CARF expand global tax transparency for digital assets, driving compliance in a fast-evolving financial landscape.

With digital finance advancing and crypto assets becoming more common, the OECD has updated the Common Reporting Standard (CRS) to CRS 2.0 and also launched the Crypto-Asset Reporting framework (CARF). These initiatives collectively broaden the scope of the Automatic Exchange of Information (AEOI) framework to include e-money, central bank digital currencies (CBDCs) and crypto assets, while also strengthening due diligence requirements and harmonising data schemas to improve data quality and minimise redundancies.

 Although some jurisdictions are preparing for an initial go-live in 2026, Singapore and several other countries in the Asia-Pacific have opted to defer implementation of both the CRS 2.0 and CARF until 2027, with first exchanges in 2028. This measured approach is intended to provide additional time for institutions to adapt and comply with the new standards. Nevertheless, proactive preparation is crucial and should commence immediately to ensure readiness for the forthcoming regulatory changes.

From CRS to CRS 2.0

Originally introduced by the OECD in 2014 and adopted by Singapore in 2017, the CRS established a global benchmark for the annual exchange of financial account information among more than 120 jurisdictions. The CRS requires reportable financial institutions (RFIs) to disclose information regarding financial accounts maintained by a reportable account holder. The primary purpose is to enable tax authorities to obtain details about cash and financial product accounts owned by residents outside their country.  

Upon considering the feedback received from participating jurisdictions over the years and following a comprehensive review, the OECD updated the standard in 2024 (CRS 2.0). The updates in the CRS 2.0 include enhanced due diligence requirements, an expanded scope, the introduction of additional excluded and non-reporting categories, and an updated extensible markup language (XML) schema to improve interoperability. It is also important to note that the OECD CRS frequently asked questions (FAQs) are now explicitly integrated into the standard. 

What the CARF adds

The CARF is a new AEOI pillar specifically dealing with crypto assets. It requires transaction-level reporting by crypto asset service providers (CASPs), including exchanges, brokers and custodial wallet providers. Certain decentralised finance (DeFi) operators may also be included if they have control or significant influence. The CARF applies to crypto assets, which include cryptocurrencies, stablecoins, specific non-fungible tokens (NFTs), etc., while CBDCs and “specified e-money” are covered under the CRS 2.0. The OECD has published XML schemas and user guides and regularly updates FAQs to clarify edge cases and reduce overlap with the CRS 2.0.

How the CRS 2.0 and CARF interact 

It is important to distinguish between the CRS and CARF, as they are separate reporting frameworks. While both regimes are designed to be complementary, the CRS 2.0 primarily addresses financial accounts and indirect crypto exposure such as derivatives held in custodial accounts and investment entities employing crypto strategies. In contrast, the CARF focuses on on‑chain or crypto transactions, requiring transaction-level reporting by CASPs. Both standards have been structured to minimise double reporting and to maintain operational flexibility for institutions that function as both RFIs and CASPs.

CRS 2.0 vs. CARF: At a glance

New due diligence and reporting requirements under the CRS 2.0

The CRS 2.0 prescribes a number of new due diligence and reporting requirements that RFIs should meet, such as: 

• No reliance on tax treaty tiebreakers in case of dual tax residency 

• Raising additional questions in case of customers declaring to be tax resident of the high-risk citizenship by investment (CBI) or residence by investment (RBI) countries

Some of the new reporting requirements for each reportable account include the following:

• Type of financial account e.g., custodial

• Whether the account is a joint account and if so, the number of joint account holders

• The role of controlling persons e.g., a 25% shareholder

• Whether the account is a new or pre-existing account

• Whether a valid self-certification for the account has been obtained

Singapore financial institutions also should be aware that although the new requirements under the CRS 2.0 will not mandate reporting until 2028 (in respect of the 2027 reportable year), the CRS 2.0 XML schema must be adopted for reporting in 2027 (for the 2026 reportable year). This measure is intended to align the filing format with other jurisdictions implementing CRS 2.0 from 2026. Since the CRS 2.0 will not yet be in effect for Singapore in the 2026 reportable year, financial institutions will be required to utilise transitional codes when submitting reports using the CRS 2.0 XML schema in 2027 (for the 2026 reportable year).

Practical compliance steps for financial institutions

Singapore businesses engaged in e-money, crypto asset derivatives, and crypto asset investments should review the CRS 2.0 regulations thoroughly to determine whether the business may fall within the scope of the updated requirements.

Although the amendments may seem straightforward, detailed review of specific provisions is essential to ensure accurate implementation. It is highly recommended that financial institutions consult with their advisors regarding these changes to avoid implementing the changes incorrectly.

After establishing how the amendments pertain to each institution, an evaluation of current data availability should be undertaken. This assessment will identify whether the newly required data points are already being collected and, if so, what modifications are necessary to make this information accessible to the CRS reporting team. Systematic updates to processes and procedures, including revisions to operating manuals, are likely to be required. The scale of such changes will vary for each organisation, and experience suggests that even minor system adjustments can take a long time. It is strongly recommended that financial institutions initiate this assessment without delay.

Conclusion

The CRS 2.0 and CARF collectively eliminate the transparency gap between traditional financial systems and digital assets. Achieving compliance and maximising benefits require robust data architecture, precise classification and rigorous control frameworks. Institutions that proactively implement these standards will not only minimise remediation expenses and mitigate regulatory risks but also strengthen client confidence as the new AEOI chapter is about to begin.

The co-authors of this article are Tom Toryanik and Sima Shah, both Partners, Financial Services Tax from Ernst & Young Solutions LLP.