Mr. Zhou, who had been holding cryptocurrency for many years, felt a pang of anxiety in early 2026 when he heard that Hong Kong was going to include crypto assets in the CRS information exchange—he had always assumed that as long as his coins were stored in a cold wallet and transferred on-chain, the tax authorities wouldn’t be able to “see” them. Starting this year, he’ll have to change that mindset.

In April 2026, Hong Kong’s “Taxation (Amendment) (Automatic Exchange of Information) Bill 2026” was submitted to the Legislative Council for its first reading, marking the beginning of the legislative implementation phase for CRS 2.0; the revised CRS had already taken effect on January 1, 2026, with the first exchange scheduled for 2027.

This article clearly explains the key updates to CRS 2.0, the reporting logic for crypto assets (CARF), and who is affected. It is recommended reading for high-net-worth individuals who hold overseas accounts or digital assets.

01

What is CRS 2.0?

The Common Reporting Standard (CRS) is an international tax transparency tool released by the OECD in 2014. More than 120 tax jurisdictions have committed to implementing it, under which financial institutions identify accounts held by foreign tax residents and automatically exchange this information annually. Based on this, mainland Chinese tax authorities obtain information on residents’ offshore accounts and assets.

In 2023, the OECD released CRS 2.0 (the revised CRS + CARF framework for crypto-assets). The revised CRS will take effect on January 1, 2026, with the first exchange of information scheduled for 2027 (corresponding to the 2026 reporting year). Hong Kong plans to implement CARF and the revised CRS in phases between 2027 and 2029.

The draft bill, which will undergo its first reading in Hong Kong in April 2026, primarily aims to strengthen the existing AEOI/CRS administrative framework (mandatory registration, record-keeping, and penalties); if passed, it will take effect on January 1, 2027. The formal implementation of CARF and the revised CRS will proceed through a separate legislative process.

02

Three Major Core Upgrades

First, inclusion of digital assets: CRS 2.0, for the first time, includes crypto assets (Bitcoin, Ethereum), stablecoins, NFTs, and CBDCs in the definition of financial assets; crypto asset trading platforms, custodians, and entities investing in crypto assets are all required to conduct KYC and submit reports. The original CRS covered only traditional assets such as deposits, stocks, mutual funds, and insurance.

Second, full exchange of dual tax residency information: Under the first-generation CRS, dual tax residency status was reported to only a single jurisdiction in accordance with the “greater-of” rule; CRS 2.0 requires the truthful reporting of all tax residency jurisdictions, and financial institutions must report to all relevant jurisdictions simultaneously to prevent “tax avoidance through switching tax residency status.” The “add-or-comparison rule” itself has not been abolished, but the scope of reporting has changed.

Third, enhanced look-through reporting: A new “Ultimate Beneficial Owner (UBO)” role field has been added to enable look-through reporting down to the ultimate beneficiary; offshore shell companies with passive income exceeding 50% must be reported through look-through analysis; and the settlors, beneficiaries, and protectors of offshore trusts are now fully included in data collection. Methods such as nominee holdings and the use of shell companies to conceal ownership have essentially become ineffective.

If you’re facing a similar situation—such as holding overseas accounts or cryptocurrency assets, worrying about CRS 2.0/CARF look-through reporting, or having your offshore structure deemed a vehicle for tax avoidance—feel free to scan the QR code to contact Qicaiying’s online customer service (WeChat/Phone: 18620388671). We’ll help you sort out your tax residency status and compliance path. Feel free to scan the QR code to add Qicaiying’s online customer service (WeChat/Phone: 18620388671), and we’ll help you untangle this entire chain from start to finish.

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03

How to Report Cryptocurrencies to CARF

The CARF (Crypto-Asset Reporting Framework), published by the OECD in 2023, is the most groundbreaking component of CRS 2.0. Hong Kong plans to have RCASPs (crypto-asset service providers) collect information starting in 2027 and exchange it with partner jurisdictions in 2028. As of February 2026, 76 countries have committed to the first round of exchanges between 2027 and 2029.

CARF employs a “transaction-by-transaction reporting” system, which differs from the CRS’s year-end balance plus annual income reporting. It covers cryptocurrency-to-fiat exchanges, cryptocurrency-to-cryptocurrency exchanges, cryptocurrency transfers, and retail payments exceeding a certain amount. Any entity that facilitates a transaction—such as an exchange, custodial wallet, or broker—may be required to file a report.

Once the reporting of crypto assets is fully implemented in 2028, licensed crypto service providers in Hong Kong will proactively report information on crypto assets held by non-Hong Kong tax residents and exchange this data globally. Whether on-chain or via centralized platforms, balances and transaction records will all be tracked—making the methods previously used to conceal assets via cold wallets essentially ineffective.

04

Who Will Be Affected?

Five categories of entities directly affected: individuals and entities holding financial accounts—such as bank deposits, securities, mutual funds, and insurance policies—in Hong Kong and overseas; beneficial owners who have established offshore companies to hold financial assets; entities holding crypto assets and related derivatives; individuals with dual or multiple tax residency status; and individuals who need to determine their Hong Kong tax residency status.

Cross-border sellers should be particularly vigilant: CRS 2.0 emphasizes “substantive operations.” Offshore shell companies lacking a physical office, local employees, and substantive business operations—the so-called “three-no” entities—will be directly classified as tax avoidance vehicles. Financial institutions have the right to refuse to open accounts for such entities or to directly report their ultimate beneficial owners. Past practices of holding assets and transferring profits through shell companies in the BVI, the Cayman Islands, and Hong Kong will face strict scrutiny and crackdowns.

For companies expanding overseas, it is not the intermediary layer itself that is truly at risk, but rather offshore arrangements that lack commercial substance, have unclear chains of control, and feature a mismatch between profit retention and operational risks. Hong Kong companies with genuine trade operations and real teams are, in fact, safer.

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05

How to Respond in Compliance with Regulations

First, accurately report your tax residency status: Don’t count on switching your reporting status by “obtaining a different status.” CRS 2.0 requires full disclosure; the consequences of concealment include back taxes, fines, and criminal liability. Second, retain your TIN and ensure economic substance: A shell structure cannot compensate for a lack of substance, and therefore cannot ensure compliance.

Third, don’t take chances with crypto assets: On-chain wallets do not equate to concealment. CARF’s transaction-by-transaction reporting requirement will take effect in 2028, so clarify the sources of your holdings and your reporting obligations in advance. Fourth, ensure your structure is legitimate: Only a Hong Kong or offshore structure backed by genuine business operations, a real team, and consistent “four flows” can withstand scrutiny.

In a nutshell: The essence of CRS 2.0 in 2026 is the shift “from formal compliance to substantive transparency.” The era of using shell companies, switching identities, and hiding assets in cold wallets is over; authenticity, transparency, and substance are the only long-term safety net for cross-border wealth.

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