IRS urges White House to embrace CARF: A shift that could redefine U.S. crypto taxes
The White House is weighing a new recommendation from the Internal Revenue Service (IRS) that could significantly reshape how cryptocurrencies and other digital assets are taxed in the United States. According to recent regulatory filings, the IRS has formally asked the administration to adopt the Crypto-Asset Reporting Framework (CARF), an emerging global standard for tax reporting on digital assets.
The proposal, officially titled “Broker Digital Transaction Reporting,” was submitted to the White House on November 14. If approved, it would bring U.S. rules in line with CARF, giving the IRS broader access to information about digital asset holdings and transactions in foreign accounts controlled by U.S. taxpayers. In practice, this would make it substantially harder for Americans to use offshore exchanges or wallets to hide gains or income from tax authorities.
CARF is designed as an international blueprint for crypto transparency. Developed by the Organisation for Economic Co-operation and Development and unveiled at the end of 2022, the framework aims to coordinate how countries share data on digital asset transactions. Its central goal is to prevent cross-border tax evasion as more wealth moves into cryptocurrencies, stablecoins, tokenized assets and similar instruments that are easy to move and difficult to trace under traditional systems.
Under the current U.S. regime, taxpayers are already required to report gains and losses on digital assets, including activity on foreign platforms. However, enforcement is challenging because many overseas exchanges do not automatically report information to U.S. authorities. CARF would change that by creating a standard that obliges participating jurisdictions to collect, standardize and exchange data about accounts and transactions involving foreign residents.
The IRS has not labeled the proposal as “economically significant” in its filing, meaning it does not expect the immediate macroeconomic impact to trigger additional regulatory thresholds. Nonetheless, the practical consequences for crypto users could be substantial. U.S. taxpayers would face more rigorous documentation requirements for digital assets held abroad, as well as increased scrutiny of capital gains and income generated on foreign exchanges and platforms.
A July policy report from the White House highlighted why the administration is receptive to CARF. The report argued that adopting the framework would help deter U.S. taxpayers from shifting digital assets overseas purely to avoid reporting requirements, while also ensuring that domestic crypto businesses are not placed at a competitive disadvantage. If only U.S. exchanges face strict reporting obligations, users can easily migrate to foreign platforms; a coordinated global standard is intended to close that loophole.
Aligning with CARF would also place the United States within a rapidly growing international bloc. More than one-third of the world’s countries have already committed to implementing CARF. According to data from the OECD, 50 jurisdictions plan to roll out the framework by 2027, among them major economies such as Brazil, Indonesia, Japan, Germany, France, Italy, Spain, Mexico and the United Kingdom. An additional 23 countries have pledged to adopt CARF by 2028, signaling a broad consensus that crypto tax transparency is becoming a global norm rather than an exception.
The U.S., meanwhile, is not waiting for CARF to overhaul its reporting regime. Domestically, regulators are preparing a new form, 1099-DA, which is set to take effect starting in January 2026. This document will require U.S.-based “brokers” of digital assets—such as centralized exchanges, certain wallet providers and possibly other intermediaries—to report more granular details of user activity. That includes not only sales and disposals, but also incoming and outgoing transfers between accounts, which can help track complex movement of funds across multiple platforms.
Together, CARF and Form 1099-DA would form a two-layered reporting structure: one focused on international cooperation and data exchange, the other tightening oversight within U.S. borders. For the IRS, this combination could dramatically increase visibility into crypto markets, from centralized exchanges and custodians to certain DeFi on- and off-ramps that fall under the definition of a broker.
For everyday U.S. crypto investors, the potential impact is mixed. On the one hand, clearer and more standardized reporting from exchanges could simplify tax filing. Instead of reconstructing every transaction manually, taxpayers might receive detailed summaries akin to traditional brokerage statements. On the other hand, those who have relied on offshore platforms or informal structures to minimize taxable visibility will find that route closing as data-sharing obligations expand.
Crypto businesses, particularly exchanges and custodians, are likely to face heavier compliance burdens. Implementing CARF means building or upgrading systems to collect standardized user identifiers, track transactions across products and assets, and securely exchange that data with tax authorities in multiple jurisdictions. Smaller platforms may struggle with the cost and complexity, which could accelerate consolidation in the industry as users gravitate toward firms able to handle regulatory obligations efficiently.
There are also important privacy and data security questions. CARF’s vision involves large volumes of sensitive financial data moving between governments across borders. While the aim is to curb evasion, critics worry about the risk of data breaches, misuse of information or mission creep beyond tax enforcement. Policymakers will need to balance the demand for transparency with robust safeguards to protect individuals from unnecessary exposure or surveillance.
Timing is another key issue. With CARF implementation expected around 2027 for early adopters, and the U.S. domestic 1099-DA rules starting in 2026, taxpayers and companies have a relatively short window to prepare. Many will need to review their internal record-keeping, change how they track cost basis and transaction histories, and potentially restructure how they operate across different jurisdictions to remain compliant.
From a policy perspective, adopting CARF would reinforce a broader trend: treating digital assets less as an exotic niche and more as a mainstream financial instrument subject to the same level of reporting as securities, bank accounts and investment funds. As crypto integrates more deeply with traditional finance—through tokenized assets, stablecoins and institutional products—tax authorities are moving to ensure that transparency keeps pace with innovation.
There is also a competitive angle. If the U.S. declined to adopt CARF while other major economies move ahead, American taxpayers might face more friction when interacting with foreign platforms that are required to comply with CARF standards. At the same time, U.S. exchanges could appear less aligned with global norms, potentially complicating cross-border partnerships and listings. Joining CARF allows the U.S. to help shape how the standard evolves rather than adapting to a system designed without its input.
For long-term crypto holders, CARF is unlikely to change the core principle that realized gains and income are taxable. However, it will make non-compliance far riskier. Taxpayers who have ignored or underestimated their reporting obligations may find themselves exposed once foreign exchanges begin transmitting data automatically. Voluntary disclosure programs and proactive consultation with tax professionals may become more common as individuals seek to clean up past years before enforcement tightens.
On the industry side, clearer tax rules and standardized reporting could have a stabilizing effect. Regulatory uncertainty has long been a major complaint from crypto firms operating in the U.S. While few welcome additional compliance costs, some businesses may prefer a unified framework over the patchwork of interpretations and enforcement actions that has characterized the space to date. In that sense, CARF and 1099-DA might be viewed as steps toward regulatory maturity.
Ultimately, the White House’s decision on the IRS proposal will signal how aggressively the U.S. intends to pursue global coordination on crypto taxation. If the administration moves forward, American crypto users, platforms and advisors will need to adapt to a world where digital asset activity is increasingly visible across borders, and where tax strategies must be built on the assumption that hiding assets offshore is no longer a viable option.