Is cryptocurrency no longer encrypted? Brothers, the fact may be that income from the cryptocurrency industry will also be subject to taxation in 2026. In the current global government shortage of funds, there is no region beyond the reach of tax authorities, so there should be no illusions in the cryptocurrency industry. Organize this article on CARF related issues. CARF mechanism: The Crypto Asset Reporting Framework (CARF) is a set of global tax information exchange standards specifically designed for cryptocurrency trading, released by the Organization for Economic Cooperation and Development (OECD) in 2022. It is regarded as an extension and supplement to the existing OECD Standard for Automatic Exchange of Tax Related Information in Financial Accounts (CRS), aimed at filling the gap of traditional CRS that does not cover encrypted asset trading information. CARF requires countries to include cryptocurrency service providers (such as exchanges, wallet custodians, brokers, etc.) in the reporting system, obtain user identity and tax residency information through due diligence, and conduct annual reports on user cryptocurrency trading activities. CARF scope: Any Reporting Crypto Asset Service Providers with sufficient nexus in jurisdictions implementing CARF must comply with uniform due diligence and reporting rules. This means that once mainstream centralized exchanges (such as Binance, OKX, Bybit, Coinbase, etc.) implement CARF in their country or region, they need to collect relevant information about users' various accounts as required, including users' identity information, taxpayer identification number (TIN) or tax number, tax resident identity, and their trading and asset status on the platform. CARF exchange content: The exchange transaction between encrypted assets and fiat currency (Crypto Asset to Fiat) requires reporting the total amount of fiat currency bought/sold (used to identify acquisition costs or total sale price). The exchange transaction between encrypted assets (Crypto Asset to Crypto Asset) requires reporting the value of the disposed and obtained encrypted assets (converted to legal tender). In fact, this type of transaction is split into "two" reports: one is the disposal of encrypted asset A (income calculated at the market price at the time of disposal), and the other is the acquisition of encrypted asset B (expenditure calculated at the market price at the time of acquisition). Transfers of encrypted assets, including situations where users withdraw funds to non custodial wallets (wallets without third-party custody). The exchange needs to report the number of times and total amount of transfers made by users to wallet addresses that are not associated with any licensed institutions, in order to increase the visibility of tax authorities on the flow of users' self custodial assets. If the tax authorities have doubts, they can further request relevant wallet address details through existing information exchange channels. Specific type of transaction identification: Exchanges should, where possible, label certain special types of transfers, such as airdrops, staking income, loan interest or repayment, to help tax authorities understand the nature of the transaction. For example, if the earnings obtained by a user in an Earn/Staking account can be identified as staking rewards, the exchange should classify them as "staking income" and report them. CARF exchange process: 1. User information collection: The exchange collects users' identity and tax resident identity information (usually obtained through the tax resident self declaration in the KYC process), and tracks and records users' various encrypted trading data throughout the year. 2. Local submission: The exchange shall report the above information to the local tax authority on an annual basis. For example, after Singapore commits to implementing CARF, the exchange needs to declare users' cryptocurrency trading data to Singapore IRAS. 3. International Exchange: The tax authorities will package the portion of the declared data belonging to foreign tax residents and automatically transmit it to the relevant counterparty jurisdiction through the OECD multilateral mechanism. Information exchange will only occur when both parties sign the CARF exchange agreement and confirm that the other party is a "reportable jurisdiction". For example, HMRC in the UK will transfer data of non UK tax resident users to their countries of residence (provided that the other party has also implemented CARF and has an exchange relationship with the UK). 4. Data application: After receiving the data, the tax authorities of the receiving country can compare it with the taxpayer's declaration situation, which can be used to check the unreported income of encrypted assets and levy taxes or recover them accordingly. As CARF is part of the tax information exchange agreement among countries, the information exchanged is only used for tax purposes and is protected by strict confidentiality and data security agreements. CARF Implementation Schedule: 1. UK: Regulations will come into effect on January 1, 2026, and exchanges will initiate data collection; The first data exchange in 2027, the first batch of participating countries, with mandatory registration and penalties for violations; 2. Japan: Starting from 2026, reporting and data collection are required; The first data exchange in 2027, belonging to the first 48 jurisdictions, will be used for tax management of overseas encrypted accounts; 3. South Korea: Starting from 2026, exchanges will collect data; The first data exchange in 2027, participation in rule making, and postponement of the Crypto Tax Act will not affect the CARF process; 4. Hong Kong, China: The first data exchange will take place in 2028, and the SAR government has announced the confirmation of its progress; 5. Singapore: First data exchange in 2028, IRAS aims to prepare for the transition from 2027 to 2028; 6. UAE: First data exchange in 2028, committed to participating, meeting G20/OECD requirements, and maintaining its position as an international financial center; 7. United States: First data exchange in 2029, followed by implementation and data collection; 8. China: The situation is quite unique, as domestic regulatory agencies have banned the domestic operation of cryptocurrency exchanges since 2017, recognizing that cryptocurrencies such as Bitcoin do not have legal status as compensation and do not belong to legal circulating currencies. In 2021, the People's Bank of China and other departments further announced that all cryptocurrency related businesses are illegal financial activities. So mainland residents will not trigger CARF automatic exchange temporarily: as China has not joined the CARF network, other countries will not automatically exchange transaction data of Chinese taxpayers with Chinese tax authorities. As long as users do not have other tax residency status (such as not obtaining tax registration in participating CARF countries), the CARF framework temporarily cannot reach them. However, in the current global situation where governments are generally short of money, there is no region that cannot be reached by tax authorities, so do not have any illusions. Tax exemption is impossible, a more reasonable approach is to find tax havens and become local tax residents, such as in Hong Kong.