With CRS2.0 about to be launched: Will your "on-chain invisibility cloak" still be around in 2026?

Author: FinTax

introduction

In 2026, global tax information exchange entered the CRS 2.0 era. To address the rapid development of asset forms in the digital economy, the OECD officially released the revised Common Reporting Standard (CRS 2.0) in 2023. Compared to version 1.0, CRS 2.0 strengthens due diligence procedures, enhances tax identity verification requirements, and formally includes digital assets such as central bank digital currencies and certain electronic money products within the reporting scope, filling regulatory loopholes in the digital finance era and further promoting international tax transparency.

Currently, several jurisdictions have designated 2026 as a key year for the implementation of CRS 2.0 and are advancing local legislation and updating supporting measures. Among them, the British Virgin Islands (BVI) and the Cayman Islands will be the first to implement CRS 2.0 rules starting January 1, 2026. Hong Kong launched public consultation on the proposed CRS 2.0 rules on December 9, 2025, and plans to complete legislative revisions this year. As a key participant in CRS, China, relying on the "Golden Tax Phase IV" system and the digital upgrade of foreign exchange supervision, has reserved ample technical space for aligning with the 2.0 standard. For relevant individuals and reporting institutions, the corresponding tax compliance preparation has entered a critical window period. This article, combining the revised content of CRS 2.0 and the latest tax administration practices, systematically summarizes the main changes and core impacts of CRS 2.0 and provides possible coping guidelines for affected individuals and institutions.

1. Background of the CRS 2.0 Revision

For a long time, crypto assets have remained outside the purview of traditional tax regulation. While the CRS 1.0 standard, introduced in 2014, established a mechanism for the automatic exchange of global tax information, its systemic flaws have gradually become apparent with the development of the Web3 market. The old rules primarily defined financial assets based on traditional custody models; as long as crypto assets were stored in cold wallets or circulated on decentralized exchanges in a non-custodial form, they could remain outside the existing reporting system. This significant tax base loss has drawn considerable attention from governments and international organizations worldwide.

To address this issue, the OECD has adopted a two-pronged approach: firstly, it has launched a dedicated Crypto Asset Reporting Framework (CARF) to facilitate information exchange on crypto transactions involving decentralized and non-traditional financial intermediaries; secondly, it utilizes CRS 2.0 as a supplement to achieve a closed-loop regulatory system. Specifically, CRS 2.0 incorporates assets with traditional financial attributes, such as electronic currencies and central bank digital currencies, into the already well-established CRS exchange network. This not only narrows the tax "gray area" created by the digital transformation of finance but also signifies the completion of the upgrade of the global tax information exchange system in the digital economy era, ensuring that major financial asset classes remain within the scope of CRS reporting.

2. Key Revisions: What's New in CRS 2.0?

CRS 2.0 is not merely a supplement specifically for crypto assets, but a systematic iteration of global tax information exchange standards. Its core purpose is not only to eliminate regulatory boundaries between digital and traditional financial assets and ensure consistent reporting results, but also to close compliance loopholes previously caused by ambiguous technical definitions and enhance international tax transparency. According to the new regulations, the improvements in CRS 2.0 compared to 1.0 mainly focus on the scope of information reporting, due diligence requirements, and the exchange of information on double taxation residents.

2.1 Expand the scope of information reporting

CRS 2.0 broadens the scope of reporting information to include emerging digital financial products. First, it includes financial products such as "specific electronic money products" and "central bank digital currencies" within the CRS reporting scope, while revising the definitions of depository institutions and deposit accounts to include electronic money service providers and the electronic money accounts they maintain. Second, it includes indirectly held crypto assets in the reporting scope. The revision of the definition of "investment entity" in the new regulations achieves comprehensive coverage of indirect holding paths of crypto assets. If a financial account holds financial products linked to crypto assets, such as crypto derivatives or fund units invested in cryptocurrencies, it will also be subject to the due diligence and reporting procedures under the CRS framework. Third, in addition to key identification information of account holders and controllers and financial account transaction information, reporting institutions need to supplement the reporting with other related information, including identifying joint accounts, the type of financial account, and the due diligence procedures applied, to promote tax compliance.

2.2 Strengthen due diligence requirements

CRS 2.0 further strengthens the requirements for the quality and reliability of information sources in due diligence. First, for cases where valid self-verification is not obtained, reporting agencies are required to conduct exceptional due diligence procedures to ensure effective reporting of such accounts. Second, CRS 2.0 establishes a government verification service, which aims to allow reporting agencies to directly obtain confirmation of the taxpayer's identity and unique tax identification identifier from the tax authority in the taxpayer's place of residence. Currently, reporting agencies conduct due diligence primarily based on AML/KYC documents, user self-verification, and other account information collected by the reporting agencies; this measure will enhance the reliability of due diligence results.

2.3 Achieve comprehensive exchange of information on dual tax residents

In reality, the holder of an entity or individual account may hold tax residency status in two or more jurisdictions. Under the original CRS framework, such dual or multiple residency statuses could use conflict resolution rules to determine a specific residency status for self-verification. This could lead to account holders being prematurely identified as tax residents of a single jurisdiction, resulting in relevant information not being reported to other jurisdictions. Against this backdrop, CRS 2.0 requires account holders to prove all their tax residency statuses during the self-verification process. Through a "full exchange" mechanism, CRS information for an account can be synchronized to multiple jurisdictions. This means that for high-net-worth individuals with dual residency status or complex cross-border asset allocation, a stricter tax identity verification mechanism will reduce their flexibility in selectively reporting across different jurisdictions.

3 Impact Assessment and Response Strategies

3.1 For investors

For investors, the regulatory safe havens previously built using geographical arbitrage or non-custodial wallets will become unsustainable. They will face challenges such as thorough scrutiny of tax information and full information exchange across multiple tax jurisdictions, significantly increasing their tax compliance costs. This is especially true for holders of digital financial assets or cryptocurrencies, as the interaction between the revised CRS rules and the CARF framework has brought such investments fully into the tax information exchange and tax administration frameworks of various countries.

To address the new regulatory requirements, high-net-worth individuals holding substantial amounts of crypto assets should pay attention to the new rules regarding the determination of "tax residency." Simply holding a foreign passport without substantial evidence of local residence or utility payment records, or relying solely on documents to isolate tax risks, is no longer sufficient. The focus of compliance must shift back to a genuine alignment between lifestyle and economic interests, optimizing offshore and onshore structures to achieve effective asset segregation and risk stratification.

Secondly, if investors are unable to provide complete and coherent original cost vouchers due to frequent on-chain interactions, multi-platform operations, or missing historical records, tax authorities may assess their taxable profits in a way that is unfavorable to the taxpayer during audits, based on anti-tax avoidance considerations. Investors may consider using professional financial and tax tools to review existing declaration records and financial account information, complete tax self-assessment, prepare supplementary declarations, and build compliant ledgers that can withstand audits.

3.2 For institutions with reporting obligations

According to CRS 2.0, electronic money service providers and other industry institutions will also be included in the scope of reporting obligations, and must proactively fulfill their due diligence and information reporting obligations to users. Furthermore, all reporting financial institutions face stricter due diligence requirements and a broader scope of information reporting. This requires reporting institutions to upgrade their reporting infrastructure and complete the corresponding updates to their information collection, verification, and reporting systems before the new regulations take effect in their respective jurisdictions. Failure to fully fulfill the obligations under CRS 2.0 may trigger severe penalties for reporting institutions and related responsible persons, resulting in greater economic and reputational losses.

In response, reporting institutions can proactively deploy CRS 2.0 compliant technical systems to address complex auditing and data reporting requirements. For example, such systems can be enhanced to identify and characterize complex transaction types, joint accounts, and financial account types. Secondly, reporting institutions should closely monitor relevant legislative developments in their jurisdictions to understand local regulations and respond effectively in a timely manner. CRS 2.0 requires domestic legislative adaptation in each country to become legally binding, and the implementation timelines and details vary from country to country. Therefore, reporting institutions and their staff should not only pay attention to the general guidelines issued by the OECD but also focus on the implementation progress and specific provisions of local regulations.

Conclusion

2026 has arrived, and the CRS 2.0 and CARF frameworks are being gradually implemented in countries around the world. With the upgrading of the international tax information exchange system and the tightening of tax authorities' penetrating collection efforts, the era of hidden Web3 wealth is over. The new CRS regulations not only significantly impact the reporting requirements of financial institutions but also impose higher tax regulatory requirements on cross-border investors. Rather than waiting for risks to materialize amidst uncertainty, it's better to proactively complete compliance transformation during the policy window. After all, in the CRS 2.0 era, visible compliance is often safer than an invisible asset "cloak."