Hong Kong opened a public consultation on December 9, 2025, to adopt the OECD’s Crypto-Asset Reporting Framework (CARF) and update its Common Reporting Standard (CRS). Framed to curb cross-border crypto tax evasion, the move signals tighter reporting obligations for crypto platforms and increased traceability for users.
CARF rollout, DeFi gaps and rising compliance demands
The consultation runs until February 6, 2026, with legislative amendments targeted for completion during 2026. Authorities plan the automatic exchange of crypto-asset tax data with partner jurisdictions from 2028, aiming for a fully operational CARF-aligned CRS by 2029 and placing Hong Kong in step with an international rollout that anticipates some 67 jurisdictions implementing CARF by 2027–2028. CARF is the OECD’s global standard requiring Crypto-Asset Service Providers (CASPs) to collect, verify and automatically share tax-relevant crypto data with tax authorities.
The consultation texts acknowledge a key structural risk: decentralized finance (DeFi) protocols and many DAOs do not fit neatly into the CARF definition of a Virtual Asset Service Provider (VASP). Academic analyses, including work cited from Harvard Law School, flag this definitional gap as a major vulnerability that could allow tax-relevant activity to remain outside reporting channels, while unsettled tax treatment of staking rewards, liquidity-pool yields and other DeFi income blurs the line between capital gains and ordinary income and complicates residency-based reporting. Hong Kong is examining DAO recognition models, but the consultation does not yet set out concrete legal fixes to close these specific loopholes.
Crypto-Asset Service Providers (CASPs): Platforms face a substantial compliance uplift. They will need enhanced KYC, transaction-level recordkeeping, verification systems and secure cross-border data exchange capabilities, with higher penalties and mandatory registration increasing operational and capital costs for exchanges, custodians and brokerages.
Individual users and treasuries: Increased data flows will reduce pseudonymity. While Hong Kong’s territorial tax system traditionally exempts capital gains, CARF’s focus on tax-relevant data from activities such as staking and mining will make previously opaque yield streams more visible to tax authorities, and corporate treasuries and institutional holders should expect tighter reporting requirements and plan for audit trails covering tokenized assets and real-world asset allocations.
DeFi projects and DAOs: Persistent legal uncertainty presents execution and counterparty risk. Without clear statutory designations, decentralized projects face ambiguity over reporting obligations and liability, which could impede institutional integrations and token listings under regulated regimes even as Hong Kong pairs CARF adoption with concurrent stablecoin and digital-asset licensing efforts.
