Hong Kong opened a public consultation to implement the Crypto-Asset Reporting Framework (CARF) and to amend the Common Reporting Standard (CRS) for crypto assets. The consultation aims to compel service providers to collect and exchange tax-relevant crypto data as part of a wider effort to reduce cross-border tax evasion.
Expanding CARF and CRS to cover crypto-asset activity
The Crypto-Asset Reporting Framework (CARF) is a reporting standard designed to extend automatic exchange of information to crypto assets. Under the proposals, Crypto-Asset Service Providers (CASPs) — including exchanges, brokers and custodians — would be required to identify users, verify tax residency and report detailed transaction information and asset types. The reporting scope envisages transfers, exchanges and dispositions of value-bearing crypto assets, potentially including stablecoins, derivatives tokenised as crypto assets and certain NFTs that function as payment or investment instruments.
Operationally, CARF would obligate CASPs to collect and retain enhanced client records and to implement know-your-customer (KYC) and beneficial-owner checks aligned with existing AML obligations. The framework would make annual automated exchanges of reported crypto-asset data with partner jurisdictions, mirroring the CRS mechanism but tailored to the features of digital assets, and would introduce mandatory registration and stepped-up penalties and enforcement powers for non-compliance.
The consultation places Hong Kong within the international move to bring crypto into existing transparency regimes established by multilateral standards. The public document sets out an expectation that cross-border exchange of crypto-asset tax information would begin in 2028, with the revised CRS incorporating CARF becoming fully operational in 2029 in coordination with other jurisdictions and OECD technical work on crypto tax reporting.
Regulatory alignment seeks to reduce jurisdictional risk for institutional participants and to address perceived gaps that allowed crypto transactions to escape traditional reporting. For Hong Kong, adopting CARF is positioned as a strategic step to retain financial-centre status while mitigating regulatory arbitrage and reputational risk.
The proposed rules materially raise operational compliance obligations for VASP operators and custodians. Affected entities should expect to enhance onboarding to capture verified tax residency and beneficial-owner data, maintain transaction-level records for annual reporting, register with local authorities under new reporting requirements and prepare for stronger enforcement and fines.
From a risk perspective, firms will need upgraded process audits, segregation of custody and retention policies and IT systems capable of aggregating and transmitting standardized crypto-asset data. The shift reduces anonymity risks for end users and increases traceability for treasuries and institutional desks managing on-chain exposures.
Hong Kong’s consultation, opened on December 9, 2025, begins a transition toward compulsory crypto-asset tax reporting intended to start international data exchange in 2028. The proposals will drive operational changes across exchanges, custodians and compliance teams and will shape how digital assets are integrated into global tax transparency regimes.
