Abstract

The global tax information exchange system is undergoing a significant upgrade. CRS 2.0 (Common Reporting Standard) has incorporated crypto-assets and central bank digital currencies into its reporting scope, while CARF (Crypto-Asset Reporting Framework) establishes a dedicated regulatory framework for crypto-assets. For enterprises and individuals holding cross-border assets, understanding the pace and boundaries of these changes has become an essential requisite for wealth management.

I. The Core Changes of CRS 2.0: Extending to Digital Assets

Since its introduction in 2014, the CRS (Common Reporting Standard) has become the foundational standard for the automatic exchange of financial account information globally. Since 2018, China has completed information exchanges with over 100 countries and jurisdictions. CRS 2.0 is not merely a technical patch; the revised version released by the OECD (Organisation for Economic Co-operation and Development) in 2023 includes specified electronic money products, central bank digital currencies, and crypto-asset derivatives into the reporting system. Cross-border allocation methods that previously relied on digital wallets will now face greater transparency. Meanwhile, due diligence standards have been tightened; financial institutions are required to cross-verify client self-certifications and mandatorily collect Tax Identification Numbers (TINs). Accounts with incomplete or questionable information may face restrictions or remediation requirements.

II. CARF: The Dedicated Regulatory Framework for Crypto-Assets

The CARF (Crypto-Asset Reporting Framework) is an information exchange standard tailored specifically for crypto-assets. Its reporting entities include cryptocurrency exchanges, custodian wallet providers, and brokers. Reportable transactions include exchanges between fiat currencies and crypto-assets, exchanges between different crypto-assets, and cross-platform or cross-wallet transfers. Service providers must collect users' tax residency status and TINs to ensure that each transaction corresponds to a specific taxpayer.

III. Hong Kong's Implementation Pace: A Phased Approach

Hong Kong maintains a proactive pace in implementing OECD standards. According to officially announced arrangements:

Note: The following arrangements are premised on the passage of the Inland Revenue (Amendment) (Automatic Exchange of Information) Ordinance 2026 [CRS administrative framework, gazetted on 26 June 2026] and the Inland Revenue (Amendment) (Crypto-Asset Reporting Framework and Amended Common Reporting Standard) Bill 2026 [CARF + CRS 2.0, gazetted on 22 May 2026] by the Legislative Council.

IV. Asset Boundaries Worth Noting

Not all assets automatically fall within the scope of exchange. Under current rules, overseas bank accounts, securities holdings, cash-value insurance policies, beneficial ownership information of offshore trusts, and crypto-asset transaction data from 2028 onwards will be subject to exchange. Conversely, overseas physical real estate, gold and jewelry, artworks, and non-listed company equity directly held by individuals are currently not subject to direct exchange.

The look-through rules for offshore trusts are particularly noteworthy. Due to the relatively high proportion of passive income, the majority of family trusts may be classified as "Passive Non-Financial Entities (PNFEs)," requiring the identification and reporting of information regarding the settlor, beneficiaries, and controlling persons. On 24 July 2026, the Ministry of Finance and the State Taxation Administration of China jointly issued the Announcement on Matters Concerning Individual Income Tax on Offshore Trusts (Ministry of Finance and State Taxation Administration Announcement No. 21 of 2026), further clarifying the regulatory framework for "look-through" taxation.

V. Grasping the Compliance Rhythm: From Understanding to Orderly Arrangements

The implementation of CRS 2.0 and CARF is a gradual process, and Hong Kong's phased arrangements provide the market with a window for adaptation. At the practical level, it is recommended to prioritize reviewing the reporting obligations of existing cross-border structures, confirming the consistency of tax residency status, and completing information such as TINs.

For investors involved in crypto-asset allocations, understanding the scope of reporting obligations for service providers under CARF will help assess the information visibility of their own assets.

The direction of global tax transparency is relatively clear, but differences and transitional arrangements still exist in the implementation details across various jurisdictions. In this broader context, maintaining continuous attention to regulatory changes may be more pragmatic than rushing into major adjustments.

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