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

Author: FinTax

Introduction

By 2026, the global tax information exchange will enter the CRS2.0 era. In response to 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 from January 1, 2026. Hong Kong SAR conducted public consultations on the proposed CRS2.0 rules on December 9, 2025, with plans to complete legislative revisions within this year. As an important participant in CRS, China relies on the “Golden Tax Phase IV” system and the digital upgrade of foreign exchange regulation to reserve sufficient technical space for connecting to the 2.0 standards. For relevant individuals and reporting institutions, the necessary 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 the 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, set up a mechanism for automatic global tax information exchange, 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 cold 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 response 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 electronic money, central bank digital currencies, and other assets with traditional financial attributes into the established CRS exchange network. This not only narrows the tax “gray area” caused by digital financial 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 to eliminate regulatory boundaries between digital financial assets and traditional financial assets, ensure consistency in reporting results, and fill compliance gaps caused by technical ambiguities—enhancing international tax transparency. According to the new regulations, CRS2.0 mainly improves in three areas: 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 to include 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 enables coverage of crypto asset indirect holdings. If financial accounts hold financial products linked to crypto assets, such as crypto derivatives or fund shares 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, as well as financial account transaction data, reporting institutions are required to include additional related 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 in due diligence. First, for cases where valid self-certification is not obtained, reporting institutions need to conduct exception due diligence procedures to ensure effective reporting for such accounts. Second, CRS2.0 introduces government verification services, allowing reporting institutions to directly obtain confirmation of taxpayer identity and tax identification numbers from tax authorities in the taxpayer’s residence 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 individuals could use conflict resolution rules to determine a specific identity for self-certification. This could lead to premature identification of the account holder as a tax resident of a single jurisdiction, resulting in information not being reported to other jurisdictions. In this context, CRS2.0 requires account holders to prove all their tax residencies during the self-certification process. Through a “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 across jurisdictions.

3 Impact Assessment and Response Strategies

3.1 For Investors

For investors, the era of using geographic arbitrage or non-custodial wallets as regulatory safe havens will come to an end. They will face challenges such as transparent tax information scrutiny, full exchange of multiple jurisdictional tax residency information, 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 status.” Relying solely on holding foreign passports without substantial evidence of residence or utility bill records 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 for anti-avoidance purposes, potentially assessing taxable profits unfairly. Investors can consider using professional tax tools to review existing reporting records and financial account information, conduct self-audits, prepare for supplementary filings, and build audit-proof compliant books.

3.2 For Reporting Obliged Institutions

According to CRS2.0, industry institutions such as electronic money service providers will also be included in the scope of reporting entities, requiring proactive due diligence and information reporting for users. All reporting financial institutions will face stricter due diligence requirements and broader information 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 greater 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 strengthen identification and labeling 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 implementation timelines and detailed rules vary across countries, institutions and staff should pay close attention to both OECD guidelines and local legislative progress.

Conclusion

2026 is here, and CRS2.0 along with the CARF framework is gradually being implemented worldwide. Under the upgrade of the international tax information exchange system and the tightening of tax authorities’ enforcement, the era of hidden wealth in Web3 is over. 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 erupt in uncertainty, proactive compliance transformation during this policy window is advisable. After all, in the CRS2.0 era, visible compliance is often safer than assets hiding behind invisible “invisibility cloaks.”