Speaker: 00:00:05

Good morning.

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Good afternoon, everyone, and thank you

for joining us in today's 1515 podcast.

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My name is Anthony Mourginos.

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I'm a partner in the Cayman Islands

Regulatory and Financial services team,

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and I'm joined today

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by my colleague Dan Moore from our Maples

Group Hong Kong office.

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Today we're going to walk

through the implementation of the OECD's

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Crypto Asset Reporting Framework,

or CARF in the Cayman Islands.

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We'll broadly cover five topics.

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What CARF is and why it matters.

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Who's in scope in the Cayman Islands?

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What businesses generally need to do

and buy when?

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How CARF differs from the CRS or the common reporting standard

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and how Cayman is implemented

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CARF domestically, including key days

and compliance touchpoints.

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We'll then wrap up at the end

with some practical takeaways.

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Now, before we get into the meat of it,

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I just, it goes

without saying that today's session,

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is intended as high level information

only and not legal advice.

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Obviously, if our listeners would like

more information or formal advice

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on the cough regime

or any other regulatory aspect,

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please do feel free

to reach out to a usual Maples contact

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or Dan and myself,

and we'd be more than happy to advise.

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Thanks, Anthony.

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So CARF represents

a significant new international

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tax transparency framework

across the digital assets ecosystem.

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The Cayman Islands has now published

its legislative implementation,

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with the framework having gone

live on the 1st of January 2026.

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So today's session is designed

to be practical,

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deadline focused and aligned to what

the rules require.

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That's right. Thanks, Dan.

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So let's kick it off with some,

a high level

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understanding of CARF

and the OS, OECD's framework.

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At a high level.

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So as I said before, CARF is the OECD's

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dedicated global transparency

framework for crypto assets.

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It requires annual automatic exchange of

tax relevant information on transactions

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in what are called relevant crypto assets,

which are to be reported by

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what are called reporting crypto assets

service providers or RCASP.

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It doesn't quite roll off the tongue.

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So, for today's session,

I'll try to refer them,

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refer to them as service providers

or crypto asset service providers.

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And those types of service

providers, need to report

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where they have a nexus in the,

participating jurisdiction.

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CARF was developed

with a close visibility to the gaps

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that arise because, crypto assets can,

in some instances,

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be issued, held and transferred outside

of traditional financial intermediaries.

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So the framework is built around,

the following general, building blocks.

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So what are the assets covered?

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As I mentioned before.

Crypto assets in the name.

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So crypto assets are,

I'm sure most of our listeners know

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digital representations of value

that rely on, cryptographically secured

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distribution, distributed ledger

and or similar technology.

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So relevant crypto assets.

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So for the purposes of the CARF regime.

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So crypto assets that give rise

to reporting or certain relevant

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transactions that need to be reported

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on the cuff, generally excludes

or to start with what's out.

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Then we'll go to what's in generally

exclude central bank digital currencies.

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Certain specified e-money products

or assets that are providers

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generally determined can't be used

for payment or investments set purposes.

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So a report a relevant

crypto asset, in practice generally means

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most mainstream tokens, stablecoins,

unless they qualify as specified e-money,

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many NFTs that are used for investment,

and derivatives

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that are issued in the form of crypto

assets will generally be in scope.

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So who's, required to report?

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So as I mentioned before,

reporting crypto asset service providers,

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those those types of entities

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are in scope of the regime.

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Service providers that are incorporated,

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registered, established

or regulated in the relevant jurisdiction.

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In our case, obviously the Cayman Islands,

or have an effective

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management into a regular place

of business in that jurisdiction,

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which as a business provide

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a service effectuating

what's called exchange transactions for.

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And we'll go into what

that means, later on in the session

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for or on behalf of customers.

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Including acting as a counterparty

or intermediary

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or by making available a trading platform.

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So this includes any service provider,

through which a customer can exchange

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crypto assets.

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Whether that's, crypto for fiat

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or vice versa,

or for crypto to other crypto assets.

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For example,

it can include certain brokers or dealers,

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dealing in crypto assets, market

makers, operators of crypto asset ATMs,

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and depending on the control and influence

factors, certain types of decentralized

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exchange platforms,

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whether or not these exchange platforms

are going to be, in scope or the operate

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is basically depends on a factual analysis

of their control influence over it.

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Don't have time to get into it

today, but, there's an interesting,

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analysis

to be done for those types of exchanges.

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What type of transactions

need to be reported on the cuff?

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So there are, as I mentioned before,

there's generally three types

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of transactions

involving relevant crypto assets

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that, are relevant to transactions

that need to be reported under CARF.

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Crypto to

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fiat exchanges, crypto

to crypto exchanges,

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and certain types of transfers

including high value retail payments.

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So I think that the limit there is or the

the the threshold there is 50,000 USD.

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What needs to be reported?

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Reporting crypto asset service

providers have to report specified

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identification data

with respect to their users

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or the customers,

which can be individuals or entities.

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And if, if there are entities relevant,

controlling persons with respect

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to those entities,

as well as the aggregated

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transaction values with respect

to those reportable transactions, service

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providers have to, collect, certain due

diligence on reportable customers.

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So the providers have to collect

and validate self-certification

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for new customers as of 1st January 2026,

and for preexisting customers.

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So customers, that were in place,

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as at 31st of December 2025,

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within 12 months of the rules

taking effect.

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It's also the case that, as with the CRS

regime, service providers

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can validate and certify the information

provided with respect to customers

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using their already collected

AML or KYC, information.

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And I think that brings us to a

an interesting point

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is that this framework, the CARF

framework, is designed to interact

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efficiently with the CRS

in recognition of the fact that really

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this regime is extending AEOI to crypto,

but there will be institutions

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that are subject to both.

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So we'll get into a little bit

more detail.

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But certain assets remain under the CRS.

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Even crypto assets like the central bank

digital currencies like specified e-money,

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if they're held in a financial account.

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Whereas CARF operates a little bit

more broadly with respect to crypto. So

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we will discuss that in a little bit

more detail.

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We were just mentioned at this point

that the regimes are calibrated

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to reduce double reporting

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or eliminated where an institution

is subject to both CRS and CARF,

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and I think that's something

that market participants will be,

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will be getting to grips with as, as this,

as familiarity with CARF develops.

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So I think that brings us on to the Cayman

Islands implementation of CARF.

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There are implementing regulations,

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from 2025, which came into force

on the 1st of January, 2026.

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So CARF in the Cayman Islands

with respect to relevant

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reporting crypto assets

service providers is in force now.

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And what those regulations do similar

to CRS, is they adopt the OECD definitions

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from the overall CARF framework,

and they embed them into Cayman law.

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And then also on top

you have the Cayman specific

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mechanics on operational matters

like the registration,

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the filing, the monitoring and of course

the penalties for noncompliance.

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So the regulations broadly

do kind of those, those important things.

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The key and scope concept,

as Anthony mentioned,

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is the Cayman report

and crypto asset service provider.

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So to the extent that the Cayman regs

are implementing CARF, they do apply

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only to those Cayman connected report

and crypto assets service providers.

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And again that that's been discussed.

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But it broadly will capture

reporting crypto assets, service providers

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that are resident

in the Cayman Islands or, or a branch.

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And there are various,

there are various meanings,

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that are attached to resident

in the islands and, and the branch aspect.

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And so, yeah, it's interesting point,

about that, the scope of the regime.

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I think now that we

have the regulations out there, it's it's,

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one point to kind of get out there

and clarify with listeners is that,

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the definition of a reporting crypto

asset service provider,

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a can include obviously entities,

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as well as individuals

that are acting as a business.

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And it's not limited to virtual asset

service providers.

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Our listeners will, I'm sure, be familiar

with the virtual asset service providers,

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act in the VASP

regime in the Cayman Islands,

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of a reportable crypto asset.

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Oh, sorry.

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A relevant crypto asset service

provider is not limited to VASPs.

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So it is possible

that a VASP could as Dan mentioned,

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could also be in scope of CARF.

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But certain VASPs

will probably most likely

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find themselves out of scope of CARF

due to the way that the definition of a,

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service provider

for CARF purposes, works.

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Likewise with CRS,

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just because you're

a financial institution,

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certainly doesn't mean

that you're automatically going to be

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in scope of CARF.

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So the standalone regime,

it ties in with some of the other regimes.

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But, there's some crossover, as well.

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Okay.

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So as I mentioned,

our regime in the Cayman Islands is live.

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If you are in scope,

if you are a relevant crypto asset

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reporting service provider,

what do you need to do?

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So there are a few key workstreams

that in scope entities

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will need to bear in mind.

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First of all, is registration with the

DITC, again, similar to the CRS regime,

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all Cayman Islands

reporting crypto asset service providers

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other than certain exempted

bodies are government entities and,

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certain types of pension funds

and so forth.

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Need to register with the DITC.

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There are some deadlines now out there

posted for the CARF regime.

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So existing service providers,

that are in scope,

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before the 1st of January 2026, they need

to register by 30th April of this year.

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So 30th April 2026.

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And providers that become in scope,

on or after the first of Jan 2026,

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need to register on or before that date,

31st of January of the following year.

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So they're in

this year, 31st January 2027.

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The registration again, just like,

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series is completed by the DITC

electronic portal.

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And that includes

or the registration application

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will include information

about the service provider and details

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of its principal point of contact

in the Cayman Islands.

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What else need to do?

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As I mentioned before, there's due

diligence and self-certification.

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So a reporting crypto asset service

provider has to obtain

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a self-certification

from each of its customers.

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That self-certification will allow it

to determine tax residents, conduct

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due diligence and identify customers

that have that are reportable.

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And where the entities identified,

they're reportable controlling persons.

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So from 1st January 2026,

a new customer for reporting crypto

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asset service provider has to provide

a valid self-certification at onboarding.

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Covering the

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customer's name,

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address, jurisdiction of tax residence,

their tax identification number,

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if there is one, date of birth

for individuals.

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And like I mentioned before,

just like under the CRS regime,

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there are obligations on the service

provider

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to cross-check and validate

this information against existing KYC

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or AML data that that they hold

with respect to that customer.

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For preexisting customers

of a service provider.

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So customers that were in place

as a, I suppose, 31st of December 2025,

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the CARF does provide for

for a generous grace period,

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until 31st of December of this year.

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So 31st December 2026, in order to obtain

and validate the self-certification,

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for those preexisting users or customers,

again, just like with Chris,

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where we have

those certifications in place,

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there are obligations

to update that material.

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If there is a significant change.

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So there are obligations on the,

customer

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to provide that data,

updated data to the service provider.

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So the

whole purpose, as I mentioned, of the CARF

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regime, is reporting and automatic

exchange of this, crypto related data.

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So there are reporting obligations on in

scope service providers for CARF.

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So what do you need to report?

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What does the entity need to report?

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Broadly two things, details of reportable

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customers

and details of reportable transactions.

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So with respect to customers

that are in a reportable jurisdiction.

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So basically one of the jurisdictions

that has

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been listed or agreed,

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to reporting under the CARF regime,

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unless those individuals are excluded,

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either because they're publicly traded,

there are government entity,

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they're an international organization,

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a central bank, certain

types of financial institutions.

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So reportable

customers, need to be reported,

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if the

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customer is an entity or need to identify

reportable controlling persons.

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And if the, customer need to determine

if the customer is either active

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or passive, in this case,

if the customer is an active entity,

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then it's not necessary to identify

controlling persons.

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Now, our listeners will be very familiar

with these people, familiar

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in some way

with these, with this terminology,

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because it borrows heavily

from the CRS regime.

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We don't have time in this podcast

to get into the nitty gritty of all

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the details, but,

thankfully there is some, crossover,

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familiarity

with some of those definitions.

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The other thing to report is transactions.

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So a reporting crypto asset service

provider has to report on exchange

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transactions and transfers, exchange

transactions, as I mentioned before.

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Any exchanges

between crypto assets and fiat currencies

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or between one or more forms

of crypto assets and then transfers.

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So any transaction

which isn't an exchange transaction,

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including certain types of retail

payments, that moves a crypto asset,

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from or to the crypto asset address

or account of another customer.

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As I mentioned

before, the deadlines are up.

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So the first report is due

on the 31st of June, 2027.

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So 30th June, 20th June 2027.

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And that report

will cover the 1st of January

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through to the 31st of December, 2026.

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And thereafter.

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There's annual

reporting from 30th June onwards.

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Another thing to keep in

mind is recordkeeping.

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So, we, we encourage,

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in scope entities, in scope, service

providers to maintain documentation

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for at least five years,

after the end of the period

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in which the information

has to be reported to the DITC. Why?

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Because the DITC might require

and has powers to request this information

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or require certain records

be provided to it with respect to CARF.

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And that and just so you are aware,

that does include information

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which is stored

outside of the Cayman Islands.

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Another thing to keep in

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mind, governance training IT solutions.

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So if you are an in scope

service provider, what should you do?

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Firstly, determine if you're in scope.

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If you are, establish and maintain

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written policies and procedures

in order to comply with CARF.

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Including the due diligence obligations

that reporting requirements

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and then implement

those policies, procedures

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and keep evidence of the steps

and the measures that you've taken.

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Training, ensure that all the relevant

staff, that are responsible for customer

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onboarding or reporting for CARF

purposes are trained on the new regime.

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Ensure that any of your IT

systems are updated accordingly

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to ensure that you can capture

the relevant data points.

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And of course, senior management

need to be briefed and,

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up to up to speed

with the new requirements

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in order to understand

the measures that are being taken.

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Now, it wouldn't be a regulatory 1515

if we didn't at least mentioned,

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the opportunity for enforcement,

of course, just like,

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CRS and most of the other regimes

in the Cayman Islands,

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regulators do have the power to,

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enforce the obligations

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and requirements under the regime.

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Under the regulations,

there are specific offense provisions,

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including offenses for,

providing false certifications,

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tampering with the information, hindering

the authority in its obligations.

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And the DITC can also choose

to impose certain administrative fines

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up to about 50,000

Cayman Islands dollars.

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There's also the ability for the

for the authority to impose daily charges,

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interest and further penalties,

with certain caps.

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It's also important to be aware

that directors and other senior

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senior managers can also be made

personally liable

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for certain types of breaches of the act,

in certain circumstances.

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Again,

this is not a new concept that it applies

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in most of the other regimes

that we deal with day to day.

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But, very important

for directors and managers to be aware,

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like with other

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regimes, there is also a structured

procedure,

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for breaches, issuance of penalty

notices, appeals.

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With respect to the CARF regime.

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Thank you. Anthony.

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So I guess just to briefly

bring that all together, the first,

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aspect of this regime is to determine

whether whether you're in scope of it.

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So there will be some maybe legal

advice required if you are a business

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and that has crypto related activities

and you do have a connection

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to the Cayman Islands,

the first thing to do is to determine

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whether or not you're in scope

of this regime, whether you do fall within

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that definition of Cayman, reporting

how crypto asset service provider.

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And then if you are, that's really

when the obligations kick in.

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So you will need to register with the DITC

and start obtaining and validating

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those certifications and related due

diligence from your clients.

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With a view to being able

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to report this information

by the first reporting round in June 2027.

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And obviously maintaining those records

for that five year period thereafter.

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So really, it'll be a matter,

for those entities

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that are in scope of CARF in Cayman,

the build CARF into your compliance

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risk framework alongside potentially CRS

if you're already in scope

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and other compliance workflows

like AML and so on.

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And I think that's just to wrap it up,

because what we are noticing

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is that there is a little bit of confusion

in the market between CARF and CRS.

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They are related,

but they are also different.

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So we thought it would be helpful

to just briefly summarize some key

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similarities and differences

between the new crypto assets reporting

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framework

and existing AEOI in the form of CRS

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and the handful of differences

there to be discussed.

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One is that the scope of assets covered by

CRS and CARF for a little bit different.

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So CRS is focused

on historically financial accounts

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containing traditional money

and traditional financial assets.

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Recently CRS has been updated.

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So it will now

cover kind of electronic money equivalents

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such as central bank digital currencies,

start and specified e-money.

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But it is a more narrow scope in terms

of the crypto assets that might be called.

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Whereas carve is a lot more broad

with respect to crypto assets.

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So most as we said, most, most mainstream

crypto will be in scope of this.

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And even some other crypto assets

like crypto derivatives,

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certain NFTs, if they're tradable, could

could potentially be in scope as well.

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The other

a differences in who has to report.

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So CRS is based around

kind of reporting financial institutions

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in the traditional sense.

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So you were kind of investment funds,

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your custodial entities, your

depositories, certain insurance companies.

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Whereas again, because CARF is designed

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to bring the broader crypto universe

within scope of AEOI.

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You've got for CARF,

you have this concept of reporting

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crypto assets service providers,

and as Anthony mentioned, that's not just

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Cayman VASPs it will probably include

the vast majority of Cayman VASPs.

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But again, when you're determining

if you're in scope, it can cover entities

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or individuals providing these crypto

exchange services or platforms

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with a connection to Cayman Islands,

even if they're not necessarily

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registered

in the Cayman Islands as a VASP.

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And there's also a little bit

of difference in terms of the mechanics

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of reporting.

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So under CRS, it's

kind of account based reporting.

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So you've got account balances

values and certain proceeds and so on.

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Whereas while it's

out of scope of a short podcast,

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there is an aggregated transaction

based reporting by asset type.

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So it's kind of netted off,

across the crypto to fiat, crypto

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to crypto transfers on certain reportable

retail payments made using crypto.

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So that's that's a little bit

of a difference as well.

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But in terms of the practical takeaways

and in terms of our clients

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and friends listening to this podcast,

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what people really need to do, again,

just to reiterate

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the immediate action points is to assess

whether you're business number one,

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meet the functional definition of a report

in crypto asset service providers.

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And if you have this Cayman connection,

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that might bring you an scope of the

of the Cayman rules.

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If you are, you've got to register with

the DITC on or before 30th of April 2026.

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If you're already an up

and running crypto asset service provider,

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and if you're a new crypto asset

service provider,

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you know, coming into being after

the implementation of the regulations,

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you do have an extended deadline for

for doing so,

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you would also need, if you are in scope

to implement the required written

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policies and procedures,

which is something that we can help with.

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And then finally, you will need to update

your onboarding system to collect and

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validate the car certifications from users

according to the relevant deadlines.

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I think that, wraps it up from my side.

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Yeah. Thanks, Dan.

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Well, hopefully,

our listeners have, found that a useful

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00:22:59,320 --> 00:23:05,320

summary of the new CARF regime, as Dan

mentioned, of course, Maples is able

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to advise and provide more information

on the application of the regime.

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So if you,

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are a client or existing client

or potential client,

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dealing with crypto assets

and want more information on cough, and

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we want to know whether it applies to you

and if it does, what do you need to do?

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Please do feel free

to reach out to a usual Maples contact.

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Or of course, Dan and myself

are really able and willing to advise.

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So I think that closes it off for today's

1515 podcast.

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Please do, like and subscribe to the

podcast on your, favorite podcast app.

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00:23:41,000 --> 00:23:46,000

And, we look forward

to, speaking with you again next month.

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Cheers!