The OECD has introduced CARF to enable cross-border exchange of cryptocurrency transaction data; Hong Kong will collect information in 2027 and begin data exchange in 2028, while South Korea will delay taxation until 2029 due to insufficient data integration; the data provided will only include transaction records, and taxable gains still depend on tax residency and cost basis calculations.

Article author, source: Conflux

If you buy Bitcoin on an overseas exchange and then transfer it to another platform to sell, will your tax authority find out about this transaction?

If you trade tokens across multiple platforms, how do tax authorities calculate whether you ultimately made a profit or a loss?

In the past, crypto assets could move across platforms worldwide, but transaction records were often scattered across different countries and regions. Even if tax authorities established clear tax rules, they might not have full visibility into investors' complete transaction histories.

However, this information gap is gradually being filled by international tax information exchange mechanisms.

On November 4, the Hong Kong Legislative Council passed the Inland Revenue (Amendment) (Crypto-Asset Reporting Framework and Revised Common Reporting Standard) Bill 2026. As planned, relevant crypto-asset service providers in Hong Kong will begin collecting customer and transaction information from 2027, and the Inland Revenue Department will start exchanging this data with partner tax jurisdictions from 2028.

The following day, the South Korean government announced plans to further delay the implementation of the cryptocurrency gains tax by two years, to 2029.

On one hand, Hong Kong is beginning to establish cross-border channels for exchanging information on cryptocurrency asset transactions; on the other hand, South Korea has decided to further delay taxation due to insufficient preparedness for cross-border data exchange and tax enforcement.

Whether transaction records can be accessed by tax authorities has become a critical factor in determining whether cross-border cryptocurrency gains can be effectively taxed.

Overseas transactions must also be reported.

In traditional financial systems, bank accounts and securities accounts have long been included in cross-border tax information exchange mechanisms.

Since 2018, Hong Kong has been automatically exchanging financial account information with partner tax jurisdictions under the Common Reporting Standard (CRS). Financial institutions, such as banks, are required to identify their customers' tax residency status and report relevant account information to tax authorities as required.

However, cryptocurrency trading has always had a distinct characteristic: transactions can occur across platforms in different countries and regions, and can move between centralized exchanges, personal wallets, and on-chain protocols. The traditional CRS does not fully cover such transaction activities.

This is precisely why the Organisation for Economic Co-operation and Development (OECD) introduced the Crypto-Asset Reporting Framework (CARF).

CARF, released in 2023, requires eligible crypto asset service providers to collect customer identity, tax residency status, and related transaction information, which participating jurisdictions' tax authorities then share with relevant partners under international exchange arrangements.

The passage of this bill in Hong Kong means the mechanism will enter its local implementation phase.

According to the schedule, Hong Kong-related service providers must begin collecting CARF-required information starting January 1, 2027; the Inland Revenue Department of Hong Kong plans to initiate automatic information exchange with partner tax jurisdictions beginning in 2028.

It is important to note that 2027 is the year when Hong Kong begins collecting information, and 2028 is when data exchange with partner jurisdictions starts. This does not mean that all trading platforms will directly submit all customer records to foreign tax authorities in 2027.

The reporting scope of CARF primarily includes three types of activities:

• Exchange between fiat currency and crypto assets, such as buying Bitcoin with US dollars or selling Bitcoin to receive fiat currency.
• Exchange between different crypto assets, such as swapping ETH for USDT;
• Crypto asset transfers that meet reporting requirements, including transfers to other service providers or specific external wallet addresses.

Service providers must also collect customers’ names, addresses, tax residency status, and taxpayer identification numbers to link transaction records with customer identities.

This means that tax authorities may soon gain access not just to account balances, but to more detailed data that can be used to reconstruct customers' cryptocurrency transaction activities.

However, CARF does not indiscriminately monitor all on-chain activities. It primarily relies on service providers within the scope of the regime to fulfill reporting obligations. Activities involving non-custodial wallets, DeFi protocols, or other transactions not conducted through relevant reporting entities cannot be assumed to be automatically covered by CARF.

Why is South Korea waiting another two years?

If cross-border transaction data has already begun establishing an exchange mechanism, why is Korea still delaying taxation?

The reasons provided by the South Korean government precisely illustrate the relationship between information exchange and tax enforcement.

South Korea originally planned to tax income from personal cryptocurrency transfers or loans starting January 1, 2027. Under the current proposal, any annual gains exceeding 2.5 million KRW will be subject to a 20% income tax plus a 2% local tax, resulting in a combined tax rate of 22%.

However, on November 5, South Korea’s Finance Minister Lee Jong-yeol stated that the government plans to delay implementation by another two years, to 2029. This would be the fourth extension of this tax policy, which still requires subsequent legislative approval to take effect.

The South Korean government specifically noted that the timeline for cross-border tax information exchange affects the fairness and effectiveness of tax enforcement.

South Korea is not expected to begin exchanging tax information related to crypto assets with the United States until 2029. If domestic transactions are taxed first, but data from overseas platforms cannot be obtained in a timely manner, tax authorities may struggle to fully understand taxpayers' offshore transactions.

This could result in investors active on local Korean trading platforms being more easily subject to taxation, while those trading on overseas platforms may temporarily fall into a different regulatory status due to missing data.

If a tax system can only effectively cover a portion of transactions, it will be difficult to achieve fair taxation across different transaction channels.

This is also why Korea aims to use the extended timeline to refine its regulations. In addition to awaiting cross-border information exchange arrangements, the government plans to further clarify tax rules for different types of transactions, improve reporting processes, and advance legislation related to digital assets.

In other words, Korea is not simply facing the question of “whether or not to tax crypto assets,” but rather how to ensure consistent rules for investors across different channels as domestic and international transaction data gradually become interconnected.

How is tax calculated?

For investors, the most common misconception about CARF is: if the platform begins reporting transaction information, does that mean tax authorities can directly calculate your taxable profit?

The answer is no.

Trading volume, account balance, and taxable income are three distinct concepts.

For example, an investor buys BTC for $10,000 and later sells it for $12,000. Looking at this single transaction, the profit is $2,000, not $12,000.

If investors repeatedly trade or exchange cryptocurrencies across different platforms or transfer assets to personal wallets, calculating actual profits becomes more complex. Even if tax authorities obtain transaction records, they still need to apply relevant tax laws, determine asset cost bases, and assess the nature of each transaction to identify which incomes are taxable.

This is why CARF reporting data cannot be directly equated with tax returns.

At least three other issues truly affect investors' tax liabilities.

• First, does crypto-to-crypto trading constitute a taxable disposal?

If an investor exchanges ETH for USDT, this transaction may be considered a disposal of ETH under certain tax regimes, requiring the calculation of gains or losses based on the market value at the time of exchange.

This means that investors may have triggered a taxable event even without converting their assets into fiat currency. However, recognition rules vary by country and region, and the treatment in one location cannot be directly applied to another.

• Second, can losses be offset against future gains?

South Korea's original policy only allowed losses to be offset within the same fiscal year and did not permit carryforward to future years.

For example, an investor incurs a loss of 10 million KRW in the first year and earns a profit of 5 million KRW in the second year. If the two years are combined, the investor still has a net loss of 5 million KRW.

However, if the tax system does not allow loss carryforwards across fiscal years, the 5 million KRW profit in the second year may still be included in the taxable income for that year.

The South Korean government stated that it will study allowing investors to carry forward losses for up to three years to offset future gains. This arrangement is currently under consideration and has not yet become an effective rule.

• Third, tax residency status is more important than the location of the trading platform.

Using a trading platform in Hong Kong, Singapore, or the United States does not automatically subject investors to the tax regulations of those jurisdictions.

Tax authorities typically determine whether an individual is subject to taxation by first assessing their tax residency status and whether the relevant income falls within the scope of local tax law. The platform’s location is only one of several factors considered in determining reporting obligations and data exchange pathways.

Therefore, offshore platforms are not tools that can automatically change your tax status or evade tax obligations.

Will Hong Kong investors pay more taxes as a result?

Hong Kong's passage of the CARF legislation does not mean that Hong Kong has introduced a new capital gains tax on crypto assets.

Hong Kong’s tax system does not have a separate capital gains tax. Capital gains arising from long-term personal investments are generally not subject to profits tax.

However, if an investor’s buying and selling activities constitute a business or trading operation, the resulting profits may be considered Hong Kong-sourced and thus subject to profits tax. Determining whether a gain is capital in nature or constitutes trading profit requires consideration of factors such as transaction frequency, holding period, purpose of the transactions, and other specific circumstances—it cannot be determined solely based on the asset’s name or the trading platform used.

CARF changes the ability of tax authorities to obtain information, not Hong Kong’s tax principles regarding gains from crypto assets.

For Hong Kong tax residents, what truly matters is not whether transaction records will be exchanged, but whether they can explain the nature of these transactions, the source of funds, and the method of calculating gains when tax authorities gain access to more cross-border transaction information.

These records are not only for CARF compliance but also essential for investors to accurately calculate their actual gains.

Tax transparency has just begun.

Different approaches in Hong Kong and South Korea reflect the same trend: cryptocurrency tax regulation is shifting from managing transaction records within a single jurisdiction toward cross-border information collaboration.

But this process won't be completed suddenly on any given day.

Different jurisdictions implement CARF at different times, and the scope of partners participating in information exchange is not entirely consistent. Even if a jurisdiction has begun collecting data, it does not mean it can immediately obtain transaction records from all overseas platforms.

The United States and South Korea are expected to begin exchanging information starting in 2029, while Hong Kong plans to exchange CARF data with partner jurisdictions beginning in 2028. The timing differences among regions will still affect the extent to which tax authorities can fully understand cross-border transactions.

Therefore, CARF is neither a comprehensive monitoring system for cryptocurrency transactions nor a globally unified tax regime. What it truly enables is a more fundamental outcome: the opportunity to identify, report, and exchange transaction information that was previously scattered across different service providers and jurisdictions through a standardized framework.

In the past, investors may have believed that placing assets on offshore platforms would make transaction records less likely to come to the attention of local tax authorities. In the future, this assumption will become increasingly unreliable.

However, what ultimately determines an investor’s tax liability remains their tax residency status, the nature of their income, cost accounting methods, and loss offset rules.

Offshore exchanges are no longer automatically tax havens, but having transaction data visible does not mean every transaction will be taxed. The distinction between these two points is key to understanding the next phase of cryptocurrency tax regulation.

The content in this article is for reference only and does not constitute any investment advice. The market carries risks; investments should be made with caution.