The Cayman Islands has now formally committed to the OECD’s Crypto-Asset Reporting Framework (CARF)

1. What is CARF?

The Crypto-Asset Reporting Framework (CARF) is the OECD’s new global standard for the automatic exchange of information on crypto-asset transactions between tax authorities. It sits alongside, but separate from, the Common Reporting Standard (CRS):
• CRS: focuses on financial accounts and asset holdings.
• CARF: focuses on transactions in crypto-assets and requires transaction-level reporting by in-scope crypto-asset service providers.

The policy objective is simple: ensure that tax authorities in investors’ home jurisdictions receive sufficient information about their crypto activity abroad to enforce domestic tax rules. CARF itself does not create new taxes; it standardises how information is collected and exchanged.

2. Cayman Islands’ commitment & implementation timeline

The Cayman Islands was one of the early jurisdictions to publicly endorse CARF:
• 10 November 2023 – Cayman joined 40+ other jurisdictions in a joint statement committing to implement CARF and commence exchanges by 2027, subject to domestic legislative procedures.
• August–September 2025 – The Ministry of Financial Services released a consultation paper and draft Tax Information Authority (International Tax Compliance) (Crypto-Asset Reporting Framework) Regulations, 2025 for industry feedback.
• 27 November 2025 – The final Tax Information Authority (International Tax Compliance) (Crypto-Asset Reporting Framework) Regulations, 2025 were gazetted. They bring the OECD CARF into force in Cayman from 1 January 2026.
• From 2026 – CARF and the amended CRS framework will be implemented domestically, with first reporting cycles in 2027 (on 2026 data) to the Department for International Tax Cooperation (DITC). Cayman will then undertake its first exchanges with partner jurisdictions in 2027.

The OECD’s most recent monitoring update confirms that Cayman is among the jurisdictions scheduled for early implementation of CARF with exchanges starting by 2027.

3. Who is in scope in the Cayman Islands?

CARF applies to “Reporting Crypto-Asset Service Providers” (RCASPs). The Cayman regulations follow the OECD’s terminology and then connect it into local law via the Tax Information Authority framework.

Broadly, an entity may be a Cayman Reporting Crypto-Asset Service Provider if:
1. It is resident in or managed/controlled from the Cayman Islands (or otherwise falls within Cayman’s CARF nexus rules); and
2. In the ordinary course of business, it provides services to customers to exchange, transfer, safeguard or otherwise transact in crypto-assets on behalf of others.

This will typically include:
• Centralised exchanges and OTC platforms operating from or via Cayman;
• Crypto brokers, dealers and market-making entities providing services to clients;
• Custodial wallet providers and other crypto custodians holding assets for clients;
• Certain issuers of tokenised instruments (e.g. investment tokens, stablecoins) where they interact with customers in a way that meets the CARF service-provider definition.

Cayman’s existing Virtual Asset (Service Providers) Act (VASP Act) regime, including the enhanced licensing requirements effective from 2024–2025, already captures many of these actors from a regulatory perspective.   In practice, most Cayman-licensed or registered VASPs that deal with customers’ crypto will also need to assess whether they are Reporting Crypto-Asset Service Providers for CARF.

4. What must be reported under CARF?

While the Cayman regulations integrate CARF into local law, the substantive reporting obligations are driven by the OECD standard itself, now made legally binding in Cayman.

In simplified terms, a Cayman Reporting Crypto-Asset Service Provider must:

4.1 Conduct CARF due diligence
• Identify its “Crypto-Asset Users” (customers) and determine their tax residency.
• Obtain and validate name, address, date of birth (for individuals), jurisdiction(s) of tax residence, and taxpayer identification numbers (TINs).
• For entities, identify and perform due diligence on controlling persons in line with CRS-style concepts.

4.2 Report transaction-level information

For each Reportable Crypto-Asset User, the RCASP must report, by tax year, key data on:
• Crypto-to-fiat exchanges and crypto-to-crypto exchanges;
• Relevant retail payment transactions (where crypto is used to pay merchants);
• Certain transfers involving un-hosted wallets, subject to thresholds and rules in the CARF.

The report typically includes:
• The type of crypto-asset, date and gross amount of the transaction;
• Whether it was a sale, purchase, exchange or transfer;
• The fair-market value in fiat terms at the time of the transaction.

These reports are filed with the DITC (via the existing AEOI portal infrastructure, updated for CARF), which then automatically exchanges the data with partner jurisdictions where the users are tax resident.

5. What does this mean for Cayman entities?

5.1 Virtual Asset Service Providers & exchanges

For Cayman-regulated VASPs, CARF will sit alongside AML, sanctions, Travel Rule and prudential obligations:
• Classification – VASPs will need to determine whether they are Reporting Crypto-Asset Service Providers under the CARF definitions. In most cases, exchanges, custodians and brokers servicing clients will be in scope.
• Onboarding and KYC uplift – Client onboarding processes will need to capture tax-residency and TIN data in a CARF-compliant way and distinguish between customers that are in-scope and out-of-scope.
• Systems & data architecture – Trading, custody and payments systems must be able to tag and aggregate transaction-level data by user and by tax year in line with the CARF schema.
• Operational governance – Boards and senior management will need to approve CARF policies, oversee compliance and ensure periodic testing and remediation, similar to CRS/FATCA.

For many VASPs, this will be a non-trivial technology and data-governance upgrade, but one that aligns Cayman with other major crypto hubs embracing CARF.

5.2 Cayman hedge funds and tokenised funds

For Cayman-domiciled funds trading or issuing digital assets, the impact is more nuanced:
1. Traditional and digital-asset hedge funds using exchanges
• A Cayman fund that simply uses third-party exchanges and custodians for proprietary trading, without offering crypto-asset services to investors, may not itself be a Reporting Crypto-Asset Service Provider.
• In that case, the exchanges/custodians (if in scope) would handle CARF reporting on their clients (the fund), while the fund continues to comply with CRS/FATCA as a financial institution (e.g. reporting on its investors, not its trades).
2. Tokenised funds & on-chain share classes
• Where a Cayman fund issues tokenised interests or maintains on-chain share classes that are admitted to trading on a platform, careful analysis is needed:
• Is the fund (or its manager) effectively providing crypto-asset exchange, transfer or safekeeping services to investors?
• Are any Cayman platform entities involved that may be RCASPs?
• Depending on structure, one or more parties in the stack may fall within CARF – particularly if they are Cayman-based tokenisation or platform vehicles.
3. Stablecoin and structured token issuers
• Cayman entities issuing stablecoins or tokenised structured products may be in scope where they operate platforms enabling customers to transact or redeem those instruments.
• CARF interacts with the revised CRS (sometimes called “CRS 2.0”), which extends CRS to certain e-money and digital-money products. That means some instruments may be reportable under both frameworks, albeit with different data points.

For all of these, fund sponsors and managers should undertake a CARF classification analysis as part of their broader tax-transparency assessment.

5.3 Corporate treasury, proprietary trading and SPVs

Many Cayman structures are used for proprietary trading, treasury management or holding crypto on balance sheet:
• Where such an entity does not provide services to third-party customers (it only trades for its own account), it may fall outside CARF as a service provider, but:
• It may still be a Financial Institution under CRS/FATCA, with investor-level reporting obligations; and
• It may be a Crypto-Asset User from the perspective of an in-scope exchange or custodian, and thus its transactions and balances may be reported by those service providers to its home tax jurisdictions.
• Structures used by banks or corporates to distribute tokenised products may be caught as service providers and should be analysed on a case-by-case basis.

5.4 DAOs, foundations and Web3 projects with Cayman nexus

Cayman is a leading jurisdiction for foundations, companies and other vehicles supporting DAOs and Web3 protocols. For such projects:
• Any Cayman foundation company, LLC or corporate vehicle operating or controlling a platform for crypto-asset transactions could be within CARF scope as a Reporting Crypto-Asset Service Provider.
• Even if the protocol is decentralised, centralised interfaces, off-chain order-book components, gateways, or custodial features may fall into the CARF net.
• The Cayman legal entity will likely be the point of contact for the DITC, and may need to file CARF reports if classified as a RCASP.

This creates a strong incentive for DAOs and Web3 projects to align their regulatory, VASP and tax-transparency strategies from day one.

6. CARF, CRS 2.0 and the evolving Cayman regulatory landscape

CARF is being implemented in Cayman alongside amendments to CRS and against the backdrop of a much more mature virtual-asset regulatory regime:
• The VASP Act licensing regime (Phase 2) is now in force, requiring licensing for custody and virtual-asset trading platforms, with CIMA focusing heavily on cybersecurity, governance and AML.
• The new regulations ensure that indirect investments in crypto-assets – e.g. via derivatives or collective investment vehicles – are brought within the revised CRS scope, while CARF covers direct transactions at the service-provider level.
• Internationally, CARF is part of a broader convergence towards greater transparency, alongside EU initiatives like MiCA and DAC8, and the FATF Travel Rule.

The message for Cayman entities is clear: regulatory, AML and tax-transparency expectations are converging. Entities cannot treat these as separate workstreams; they need an integrated compliance architecture.

7. Practical next steps for Cayman entities

For managers and sponsors using CV5 Capital and CV5 Digital SPC, and more broadly for Cayman entities, a sensible action plan for 2026 would include:
1. Classification & scoping
• Determine whether each entity is:
• A Cayman Reporting Crypto-Asset Service Provider under CARF;
• A Financial Institution under CRS/FATCA; and/or
• A Crypto-Asset User whose activity will be reported by others.
2. Gap analysis
• Review existing onboarding/KYC, data capture, trading/custody systems and reporting pipelines against CARF requirements.
• Identify gaps in tax-residency and TIN data, particularly for legacy customers.
3. Systems and data model
• Map out how transaction-level data flows from exchange engines, custody systems and wallets into a CARF reporting dataset.
• Ensure ability to convert crypto values into fiat at the correct reference times and capture all required fields.
4. Policies, procedures & contracts
• Update compliance manuals, terms of business and offering documents to reflect CARF obligations and disclosures.
• Clarify roles and responsibilities between funds, managers, custodians and exchanges in contractual documentation.
5. Governance and oversight
• Have boards and governing bodies formally approve CARF policies and assign senior ownership.
• Build CARF into internal audit, compliance monitoring and MLRO reporting where appropriate.
6. Investor and client communications
• Prepare clear explanations for investors and clients about how CARF may affect their data and reporting.
• Align CARF explanations with wider messaging on regulatory quality and transparency, especially for institutional allocators.

8. How CV5 Capital can support managers

For managers launching or operating digital-asset funds under CV5 Digital SPC or other CV5 Capital platforms, CARF is yet another area where jurisdictional expertise and infrastructure matter.

CV5 Capital can work alongside tax advisers to help:
• Design CARF-aware fund structures – including when and how tokenised share classes or on-chain components are introduced;
• Coordinate with administrators, custodians, exchanges and VASPs to ensure that CARF, CRS, FATCA and AML obligations are coherently allocated and implemented;
• Embed CARF considerations into offering documents, side letters and operational due-diligence packs for institutional allocators; and
• Provide managers and boards with ongoing updates as the OECD and the DITC refine guidance and expand participating jurisdictions.

As global tax-transparency rules extend fully into the crypto ecosystem, choosing a platform that is both digital-asset-native and regulation-first becomes a key differentiator in fundraising and institutional due diligence.

Disclaimer: This article is provided for general information purposes only and does not constitute legal, tax or regulatory advice. Entities should seek specific advice from Cayman and onshore counsel and tax advisers on how CARF and related rules apply to their particular circumstances.

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