CRS2.0 is about to be implemented: In 2026, will your "on-chain invisibility cloak" still be there?

Article: FinTax

Introduction

By 2026, the global exchange of tax information will enter the CRS2.0 era. To address the rapid development of asset forms in the digital economy, the Organisation for Economic Co-operation and Development (OECD) officially released the revised “Common Reporting Standard” (CRS2.0) in 2023. Compared to version 1.0, CRS2.0 enhances due diligence procedures, strengthens tax identity verification requirements, and formally includes digital assets such as central bank digital currencies and specific electronic money products into the reporting scope, filling regulatory gaps in the digital financial era and further promoting international tax transparency.

Currently, multiple jurisdictions have designated 2026 as a key milestone for the implementation of CRS2.0, actively advancing local legislation and updating supporting measures. Among them, the British Virgin Islands (BVI) and the Cayman Islands began implementing CRS2.0 rules on January 1, 2026. Hong Kong SAR conducted public consultations on proposed CRS2.0 rules on December 9, 2025, with plans to complete legislative revisions within this year. As an important participant in CRS, China leverages the “Golden Tax Phase IV” system and the digital upgrade of foreign exchange regulation to reserve ample technical space for connecting to the 2.0 standards. For relevant individuals and reporting institutions, the corresponding tax compliance preparations have entered a critical window. This article systematically reviews the main changes and core impacts of CRS2.0 based on the revised content and latest enforcement practices, and provides potential response guidelines for affected individuals and institutions.

1. Background of CRS2.0 Revisions

For a long time, crypto assets have been outside the scope of traditional tax regulation. Although CRS1.0, established in 2014, created a mechanism for automatic global exchange of tax information, it gradually revealed systemic flaws with the development of the Web3 market—namely, the old rules primarily defined financial assets based on traditional custodial models. As long as crypto assets are stored in non-custodial wallets or traded on decentralized exchanges, they can evade the existing reporting system. The significant loss of tax base has attracted high attention from governments and international organizations.

To address this issue, OECD launched a dual-track strategy: on one hand, introducing a dedicated Crypto Asset Reporting Framework (CARF) for information exchange related to decentralized and non-traditional financial intermediaries; on the other hand, CRS2.0 serves as a supplement to achieve a regulatory closed loop. Specifically, CRS2.0 incorporates digital assets such as electronic money and central bank digital currencies with traditional financial attributes into the mature CRS exchange network. This not only narrows the “gray area” caused by digital transformation but also signifies that the global tax information exchange system has been upgraded for the digital economy era, ensuring that major financial asset categories remain within CRS reporting scope.

2. Key Revisions: What Has CRS2.0 Updated?

CRS2.0 is not merely a specialized supplement for crypto assets but a systematic iteration of the global tax information exchange standards. Its core purpose is not only to eliminate regulatory boundaries between digital financial assets and traditional financial assets, ensuring consistent reporting results, but also to fill compliance gaps caused by vague technical definitions, thereby enhancing international tax transparency. The main improvements of CRS2.0 over 1.0 focus on the scope of information reporting, due diligence requirements, and the exchange of dual tax residency information.

2.1 Expanding the Scope of Information Reporting

CRS2.0 broadens the scope of reportable information, including emerging digital financial products. First, it incorporates “specific electronic money products” and “central bank digital currencies” into the CRS reporting scope, while also revising the definitions of deposit-taking institutions and deposit accounts to include electronic money service providers and their maintained electronic money accounts. Second, it extends reporting to indirectly held crypto assets. The revision of the “investment entity” definition achieves comprehensive coverage of indirect crypto asset holdings. If financial accounts hold financial products linked to crypto assets, such as crypto derivatives or funds with crypto as an investment purpose, they will also be subject to CRS due diligence and reporting procedures. Third, beyond key identification information of account holders and controllers and financial transaction data, reporting institutions are required to include additional relevant information, such as joint account identification, types of financial accounts, and applied due diligence procedures, to promote tax compliance.

2.2 Strengthening Due Diligence Requirements

CRS2.0 further enhances the quality and reliability of information obtained through due diligence. First, for cases where valid self-certification is not obtained, reporting institutions must conduct exception due diligence procedures to ensure effective reporting of such accounts. Second, CRS2.0 introduces government verification services, allowing reporting institutions to directly obtain confirmation of the taxpayer’s identity and tax identification number from tax authorities in the taxpayer’s jurisdiction. Currently, due diligence mainly relies on AML/KYC documents, self-certifications, and other account information collected by reporting institutions. This measure will strengthen the reliability of due diligence results.

2.3 Achieving Comprehensive Exchange of Dual Tax Residency Information

In practice, an entity or individual account holder may have tax residency in two or more jurisdictions. Under the original CRS framework, such dual or multiple residency entities could use conflict resolution rules to determine a specific identity for self-certification. This could lead to early identification of the account holder as a tax resident of a single jurisdiction, resulting in relevant information not being reported to other jurisdictions. In this context, CRS2.0 requires account holders to prove all their tax residencies during self-certification. Through the “full exchange” mechanism, CRS information related to the account can be synchronized across multiple jurisdictions. This means that for high-net-worth individuals with dual residency or complex cross-border asset allocations, stricter tax identity verification mechanisms will reduce their ability to selectively report assets across jurisdictions.

3. Impact Assessment and Response Strategies

3.1 For Investors

For investors, the previous use of geographic arbitrage or non-custodial wallets as regulatory safe havens will no longer be sustainable. They will face challenges such as transparent tax information scrutiny, full exchange of multiple tax residencies, and increased compliance costs. Especially for holders of digital financial assets or cryptocurrencies, under the interaction of CRS revisions and the CARF framework, such investments are now fully integrated into the tax information exchange and tax collection frameworks of various countries.

To meet new regulatory requirements, high-net-worth individuals holding large amounts of crypto assets should pay attention to the new rules regarding “tax residency” determination. Relying solely on holding foreign passports without substantial evidence of residence or utility bill payments will no longer be applicable. Compliance should focus on aligning living and economic interests, optimizing offshore and onshore structures, and achieving effective asset isolation and risk stratification.

Additionally, if investors cannot produce complete and coherent original cost documentation due to frequent on-chain interactions, multi-platform operations, or missing historical records, tax authorities may adopt unfavorable measures during audits, such as adjusting taxable profits for anti-avoidance reasons. Investors are advised to use professional tax tools to review existing declarations and financial account information, conduct self-audits, prepare for supplementary filings, and build audit-proof compliant records.

3.2 For Reporting Entities

According to CRS2.0, industry entities such as electronic money service providers will also be included in the scope of reporting obligations, requiring proactive due diligence and information reporting for users. All reporting financial institutions will face stricter due diligence requirements and broader reporting scope, necessitating upgrades to their reporting infrastructure and completing information collection, verification, and reporting system updates before the new regulations take effect. Failure to fully comply with CRS2.0 obligations may trigger strict penalties, resulting in significant economic and reputational losses.

In response, reporting institutions can proactively deploy CRS2.0-compliant technical systems to handle complex audit and data reporting needs. For example, such systems can enhance identification and recognition of complex transaction types, joint accounts, and financial account types. Additionally, institutions should closely monitor local legislative developments to understand relevant regulations and respond effectively. Since CRS2.0 requires domestic legislation to be enacted for legal enforceability, and different countries have varying timelines and detailed rules, institutions and staff should pay attention not only to OECD guidelines but also to the progress and specifics of local laws.

Conclusion

By 2026, CRS2.0 and the CARF framework are being gradually implemented worldwide. Under the upgrade of the international tax information exchange system and the tightening of tax authorities’ enforcement, the era of hiding wealth in Web3 is coming to an end. The new CRS regulations not only impact reporting requirements for financial institutions but also impose higher tax supervision standards on cross-border investors. Instead of waiting for risks to materialize in uncertainty, it is better to proactively complete compliance transformations during the policy window. After all, in the CRS2.0 era, visible compliance is often safer than assets hiding behind an “invisible cloak.”