Author: FinTax

Introduction

In 2026, global tax information exchange will enter the era of CRS2.0. To address the rapid development of asset forms under the digital economy, the OECD officially released the revised Common Reporting Standard (CRS2.0) in 2023. Compared to version 1.0, CRS2.0 strengthens due diligence procedures and enhances tax identity verification requirements, formally incorporating central bank digital currencies, specific electronic money products, and other digital assets into the reporting scope, filling regulatory gaps in the digital finance era and further promoting international tax transparency.

Currently, multiple jurisdictions have set 2026 as a key milestone for the implementation of CRS2.0 and are advancing local legislation and updating supporting measures. Among them, the BVI and the Cayman Islands will be the first to implement CRS2.0 rules starting January 1, 2026. The Hong Kong region plans to conduct public consultations on the proposed CRS2.0 rules on December 9, 2025, with legislative revisions expected to be completed within this year. As an important participant in CRS, China has reserved ample technical space for connecting to the 2.0 standard through the "Golden Tax Phase IV" system and the digital upgrade of foreign exchange regulation. For relevant individuals and reporting institutions, the corresponding tax compliance preparations have entered a critical window period. This article systematically outlines the main changes and core impacts of CRS2.0 in conjunction with the revised content and the latest tax administration practices, and provides possible response guidelines for affected individuals and institutions.

1 Background of CRS2.0 Revisions

For a long time, crypto assets have been outside the purview of traditional tax regulation. Although the CRS1.0 standard, introduced in 2014, established a mechanism for the automatic exchange of global tax information, it gradually exposed systemic flaws with the development of the Web3 market—the old rules primarily anchored the definition of financial assets to traditional custody models, allowing crypto assets stored in cold wallets or circulating on decentralized exchanges to evade the existing reporting system. The significant issue of tax base erosion has drawn high attention from governments and international organizations.

To address this issue, the OECD has launched a dual-track response strategy: on one hand, it introduced a dedicated Crypto Asset Reporting Framework (CARF) for information exchange regarding crypto transactions in 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 electronic money, central bank digital currencies, and other assets with traditional financial attributes into the well-established CRS exchange network. This not only narrows the "gray area" of tax regulation brought about by the digital transformation of finance but also marks the completion of the upgrade of the global tax information exchange system in the digital economy era, ensuring that major categories of financial assets remain within the CRS reporting scope.

2 Key Points of the Revisions: What Has CRS2.0 Updated?

CRS2.0 is not merely a special supplement for crypto assets but a systematic iteration of the global tax information exchange standard. Its core purpose is not only to eliminate the regulatory boundaries between digital financial assets and traditional financial assets, ensuring consistent reporting results, but also to fill compliance gaps caused by previously ambiguous technical definitions and enhance international tax transparency. According to the new regulations, the improvements of CRS2.0 compared to 1.0 mainly focus on the scope of information reporting, due diligence requirements, and the exchange of information on dual tax residents.

2.1 Expanding the Scope of Information Reporting

CRS2.0 expands the scope of reporting information to include emerging digital financial products. Firstly, it incorporates "specific electronic money products" and "central bank digital currencies" into the CRS reporting scope, while also modifying the definitions of deposit institutions and deposit accounts to include electronic money service providers and the electronic money accounts they maintain; secondly, it includes indirectly held crypto assets in the reporting. The revision of the definition of "investment entities" achieves coverage of indirect holding paths for crypto assets. If a financial account holds financial products linked to crypto assets, such as crypto derivatives or fund shares intended for investment in cryptocurrencies, it will also be subject to the due diligence and reporting procedures under the CRS framework; thirdly, in addition to the key identification information of account holders and controllers and financial account transaction information, reporting institutions are required to supplement reports with other relevant circumstances, including identifying joint accounts, types of financial accounts, and the due diligence procedures applied, to facilitate tax compliance.

2.2 Strengthening Due Diligence Requirements

CRS2.0 further strengthens the requirements for the quality of information and reliability of sources in due diligence. Firstly, in cases where valid self-certifications are not obtained, reporting institutions are required to conduct exception due diligence procedures to ensure effective reporting for such accounts. Secondly, CRS2.0 establishes government verification services, intending to allow reporting institutions to directly obtain confirmation of taxpayers' identities and unique tax identification numbers from the tax authorities in the taxpayers' residence. Currently, reporting institutions conduct due diligence mainly based on AML/KYC documents, user self-certifications, and other account information collected by the reporting institutions, which will enhance the reliability of due diligence results.

2.3 Achieving Comprehensive Exchange of Information on Dual Tax Residents

In reality, an entity or individual account holder may have tax resident status in two or more jurisdictions. Under the original CRS framework, such dual or multiple identity residents could use conflict resolution rules to determine a specific identity for self-certification. This could lead to account holders being prematurely recognized as tax residents of a single jurisdiction, resulting in relevant information not being reported to other jurisdictions. Against this backdrop, CRS2.0 requires account holders to prove all their tax resident identities during the self-certification process, and through the "full exchange" mechanism, the CRS information related to the account can be synchronized to the multiple jurisdictions to which it belongs. This means that for high-net-worth individuals with dual resident status or complex cross-border asset allocations, a stricter tax identity verification mechanism will limit their operational space for selective reporting across different jurisdictions.

3 Impact Assessment and Response Strategies

3.1 For Investors

For investors, the regulatory havens previously constructed through geographic arbitrage or non-custodial wallets will be difficult to sustain, and they will inevitably face challenges such as penetrating scrutiny of tax information and comprehensive information exchange across multiple tax resident jurisdictions, leading to significantly increased tax compliance costs. Especially for holders of digital financial assets or cryptocurrencies, under the interaction of the CRS revised rules and the CARF framework, such investments have been fully incorporated into the tax information exchange and tax collection frameworks of various countries.

To respond to the new regulatory requirements, high-net-worth individuals holding large amounts of crypto assets should pay attention to the new rules regarding the determination of "tax resident status." Simply holding a foreign passport without local residency facts and utility payment records as substantial living evidence, and relying solely on documents to isolate tax risks, will no longer be applicable. The compliance focus must return to the real matching of life and economic interests, optimizing offshore and onshore structures to achieve effective asset isolation and risk layering.

Furthermore, if investors are unable to provide complete and coherent original cost documentation due to frequent on-chain interactions, multi-platform operations, or missing historical records, tax authorities may adopt unfavorable methods to determine their taxable profits during audits, based on anti-avoidance considerations. Investors may consider utilizing professional tax tools to organize existing reporting records and financial account information, complete tax self-checks, and prepare for supplementary reporting, thereby constructing a compliant ledger that can withstand audits.

3.2 For Reporting Obligated Institutions

According to the provisions of CRS2.0, electronic money service providers and other industry institutions will also be included in the category of reporting obligated entities, and must actively fulfill their due diligence and information reporting obligations to users. Moreover, all reporting financial institutions face stricter due diligence requirements and a broader scope of information reporting, which requires reporting institutions to upgrade their infrastructure systems for reporting and complete the updates of information collection, verification, and reporting systems before the implementation of new regulations in their respective jurisdictions. Failure to fully comply with the obligations under CRS2.0 may trigger strict penalties for reporting institutions and related responsible persons, resulting in greater economic and reputational losses.

In response, reporting institutions can proactively deploy technical systems that meet CRS2.0 requirements to address complex audit and data reporting needs. For example, such systems can be enhanced to identify and classify complex transaction types, joint accounts, and types of financial accounts. On the other hand, reporting institutions should closely monitor relevant legislative trends in their jurisdictions to understand local regulations and respond effectively in a timely manner. CRS2.0 requires domestic legislative transformation in various countries to have legal binding force, and the timelines for legislative implementation may differ, with implementation details potentially varying. Therefore, reporting institutions and their staff should focus not only on the general provisions released by the OECD but also on the progress and specific provisions of local regulations.

Conclusion

As 2026 approaches, CRS2.0 and the CARF framework are gradually being implemented in countries around the world. With the upgrade of the international tax information exchange system and the encirclement of tax authorities' penetrating collection, the era of concealing Web3 wealth has become a thing of the past. The new CRS regulations not only significantly impact the reporting requirements of reporting financial institutions but also impose higher tax regulatory requirements on cross-border investors. Rather than waiting for risks to erupt amid uncertainty, it is better to proactively complete compliance transformation during the policy window. After all, in the era of CRS2.0, visible compliance is often safer than the "invisibility cloak" of unseen assets.

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