The United States along with over 70 other countries has adhered to the Joint Statement on the OECD’s Crypto-Asset Reporting Framework, “CARF”. CARF is the digital-asset counterpart to the Common Reporting Standard “CRS” that has exchanged bank and securities account data among signatory countries (now well over 100 countries). The United States has formally indicated its intent to work towards implementing CARF into its domestic law by 2029.
United States Moving Into CARF – What It Means
Moving this toward implementation, the Treasury Department has now submitted regulations that would bring the United States into CARF. The proposal reached the White House Office of Information and Regulatory Affairs on November 14, 2025, and is now in the review phase. When cleared, the text will be published in the Federal Register for public comment.
Assuming regulations are eventually finalized, foreign centralized crypto exchanges, brokers, and custodial wallet providers will begin sending the IRS information on U.S. account holders. Reporting Crypto-Asset Service Providers, RCASPs, would be required to identify U.S. taxpayers and report the taxpayer’s name, address and TIN; the year-end fair market value of each asset and cost basis, gross proceeds from sales or exchanges, and certain transfers exceeding defined thresholds.
Generally, under CARF, a digital asset is reportable if it is a digital representation of value that can be used for payment or investment purposes (or transferred or traded digitally). It is not reportable if it is a central-bank digital currency or regulated e-money product. In practice this would essentially capture all cryptocurrencies, stablecoins, NFTs, and most tokenized assets unless they are explicitly classified as financial instruments already covered by the existing CRS. Significantly, because the proposed U.S. regulations remain confidential during White House review, it is not yet known how closely Treasury will track the exact CARF text or whether the final rules will include U.S.-specific modifications, thresholds, or additional exemptions.
CARF Closes Current U.S. Reporting Gaps
Today the IRS has almost no automatic visibility into foreign crypto accounts. CARF will close the various blind spots.
Here is what exists under the current U.S. tax and reporting rules:
FBAR (FinCEN Form 114): The FBAR instructions and relevant regulations still define a “financial account” as a bank, securities, or similar account. To date, the Treasury and the Financial Crimes Enforcement Network have not extended the definition to pure crypto holdings or non-custodial wallets. Therefore, crypto held directly or on foreign non-custodial platforms is arguably not currently reportable on FBAR.
There are important caveats, however. For example, if a foreign account contains both cryptocurrency and other assets like cash, the total value must be reported if the taxpayer’s foreign financial accounts in total exceed the $10,000 annual threshold. Since this entire area is still evolving, many tax professionals advise taking a conservative approach and suggest reporting foreign crypto accounts, even if they currently hold only virtual currency. FinCEN has stated its intention to propose changes to include foreign accounts holding virtual currency in FBAR reporting in the future, so reporting is clearly on the horizon.
Form 8938: This form is commonly called the FATCA reporting form. Assuming a certain dollar threshold for the total value of so-called “specified foreign financial assets,” SFFAs, held during the tax year is met, U.S. persons must file the form.
A SFFA includes a financial account maintained by a foreign financial institution (e.g., a non-US bank account or stock trading account) and certain other foreign financial assets that are not held in an account at a financial institution, such as stock, securities, or any other interests in a non-US entity (e.g., units in a foreign mutual funds; interests in foreign trusts and foreign estates; foreign partnership interests). It includes notes, bonds, debentures, or other debt issued by a foreign person; interest rate and currency swaps, as well as other agreements with a foreign counterparty (such as foreign life insurance contracts).
At this time, there is no clear guidance from the IRS that crypto is, or is not, to be treated as a specified foreign financial asset. Given the definition, crypto is reportable if held through a foreign financial institution or custodial arrangement and the aggregate value exceeds the relevant thresholds.
What About DeFi Transactions?
Decentralized finance, or DeFi, is a financial system that is built on blockchain technology and allows use of financial services without banks or other centralized middlemen. As such, there is no custodial element. Instead of relying on a central authority to manage and approve transactions, DeFi uses automated, “smart contracts.” A smart contract is a kind of automated self-executing code that creates a peer-to-peer system. DeFi transactions are fast and can be accessed by anyone with an internet connection and a crypto wallet.
There has been speculation that the U.S. Treasury would exempt DeFi reporting (perhaps because this aligns with the carve-out in the domestic broker rules for non-custodial protocols). However, without the official draft regulations being released, any reports of an explicit exemption for DeFi transactions are inaccurate. The lack of publicly released regulations means that the details of the U.S. approach to crypto tax reporting, including its coordination with the OECD’s CARF, are still subject to open debate and policy considerations.
Real-World Consequences: The “Bitcoin Jesus” Lesson
I wrote earlier about Roger Ver, known as “Bitcoin Jesus,” and the indictment in April 2024 for his alleged failure to report and pay tax on roughly $240 million of Bitcoin he held through foreign entities. The indictment charged mail fraud, tax evasion, and filing false returns. Prosecutors alleged he deliberately moved coins offshore and did not properly file or pay exit tax on those assets when he renounced U.S. citizenship. Ver entered a deferred prosecution agreement with the Department of Justice and IRS in October 14, 2025. As part of this agreement, he admitted to misconduct, paid approximately $50 million in back taxes, penalties, and interest, and the DOJ dismissed the indictment against him.
Roger Ver’s case illustrates how unreported offshore crypto can quickly escalate from a reporting omission to criminal exposure. Even civil FBAR penalties on undisclosed foreign custodial accounts can reach 50 % of the highest balance per year, while willful failure to file Form 8938 can trigger a $10,000 penalty plus 40 % accuracy-related penalties on any resulting underpayment. Once CARF data begins flowing, mismatches will be detected automatically, potentially resulting in very expensive problems.
Conclusion
Centralized foreign crypto platforms could soon report U.S. account holders to the IRS in much the same automatic fashion that foreign banks have under FATCA for over a decade. Details regarding pure DeFi and self-custodied assets hinge on the yet-unpublished Treasury Department information.
U.S. taxpayers holding offshore crypto should review their tax returns for proper reporting of transactions involving crypto, proper reporting under FBAR and Form 8938. Experienced tax advice should be taken and if needed, taxpayers should consider their options sooner rather than later. Some holders may feel more comfortable switching to domestic platforms to avoid uncertainty with U.S. reporting obligations.
Reach me at vljeker@us-taxes.org
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