OECD Finalizes Global Crypto Contours
The developed countries have come out with a framework that allows their central banks to keep tabs on cross border crypto transfers
Close on the heels of reports around India’s official digital currency (eRupee) launch comes the news that the league of developed countries have now created a framework that could help keep tabs on how crypto currencies get traded across geographical borders. What’s more, this framework could be a global one, which effectively means currency remains centralized.
The OECD released the global framework around how countries can monitor and report crypto currency transactions and at the core of it rests an automatic exchange of information between the countries and the mandatory customer identification. The two measures would be considered a part of the due diligence process for crypto currencies.
India is behind the move
India is already a solid backer for the global framework, having expressed its concerns around the impact of allowing private currencies floating around and how these could be used for terror funding and other anti-national activities surrounding the dark web. Both the RBI and the finance ministry have backed such a framework on monitoring the virtual currencies.
Called the Crypto Asset Reporting Framework (CARF), the framework will be presented to the finance ministers of the Group of 20 group this week in Washington, the OECD said in a statement. India is a part of this initiative and could be one of the major proponents of the framework, given its security concerns on both the western and eastern borders.
A needed move in crypto world
The initiative “comes against the backdrop of a rapid adoption of the use of crypto assets for a wide range of investment and financial uses,” the OECD said, warning that the crypto assets market “poses a significant risk that recent gains in global tax transparency will be gradually eroded”.
Readers may recall that the Group of 20 had last April (2021) mandated the OECD to develop such a framework to set up an automatic exchange of tax relevant data around crypto assets. The CARF defines the relevant crypto assets in scope, transactions, and the intermediaries and other service providers that will be subject to reporting. Any digital representation of value that relies on a cryptographically secure distributed ledger or a similar technology to validate and secure transactions will be covered under the framework.
The proposed global regime incorporates recent developments in the global anti-money laundering standards of the Financial Action Task Force. Due diligence procedures to be implemented by countries will require the identification of both individual and entity customers, as well as their controlling persons, it said. The framework requires reporting on an aggregate basis, divided by type of crypto asset and type of transaction.
Once this proposal gets accepted, it can potentially prevent information arbitrage across geographies while taxmen could also get stricter with the reporting and compliance requirements. These would ensure that buyers of the currency cannot sell in different geos and make money and also save taxes in the process – something India has harped about.
