Hong Kong opened a public consultation on December 9, 2025, to implement the Crypto-Asset Reporting Framework (CARF) and amend the Common Reporting Standard (CRS) in order to curb cross-border crypto tax evasion. The CARF consultation would require Crypto-Asset Service Providers (CASPs) to collect and report detailed user and transaction data under a phased timeline for legislative changes and automatic information exchange.
Scope, timelines and operational impact of CARF implementation
The consultation, running until February 6, 2026, proposes amendments to the Inland Revenue Ordinance that would bring a broad set of market participants into reporting obligations. CASPs identified include exchanges, brokers, custodians and wallet operators, and “crypto-assets” are broadly defined to cover digital representations of value recorded on distributed ledgers and certain digital financial products such as some forms of digital money and crypto derivatives.
The government plans to finalise legislative amendments in 2026, begin automatic exchange of crypto-asset tax information with eligible partners from 2028, and implement the amended CRS framework fully by 2029. The Crypto-Asset Reporting Framework (CARF) is described as a multilateral standard for the automatic annual exchange of crypto-asset transaction information between tax authorities.
Under the proposed rules, CASPs would perform systematic collection of granular user and transaction data and submit annual reports for reciprocal sharing between tax authorities. This automatic exchange is designed as proactive information sharing rather than a request-based system, enabling tax administrations to cross-check taxpayer declarations against reported on-chain and off-chain activity.
The consultation positions Hong Kong within a wider OECD-led movement, noting that more than 40 jurisdictions have committed to CARF implementation. The proposal cites international developments and examples of other jurisdictions that have already advanced regulation, framing Hong Kong’s timeline as consistent with global peers.
Implementation risks flagged in the consultation include practical limits on compelling truly decentralised protocols to comply and possible gaps where current definitions of Virtual Asset Service Providers (VASPs) do not capture DeFi applications or DAOs. The paper also notes risks from structural workarounds such as “Active Entity” constructs that can create reporting blind spots, presenting these as technical and legal challenges that will require adaptive rule design and ongoing engagement with the industry.
Implications for market operators focus on operational readiness: CASPs will need to upgrade data collection, verification and secure reporting pipelines while ensuring confidentiality and meeting reciprocal network participation requirements. The phased timeline is intended to provide breathing room for these technical, governance and compliance changes.
Hong Kong’s consultation formalises a pathway to integrate crypto-asset flows into established tax-reporting regimes. It signals alignment with international transparency standards while acknowledging practical limits around decentralised protocols and emerging market structures.
