Crypto-Asset Service Providers (CASPs) Defined

The definition of Crypto-Asset Service Provider is central to CARF. Whether your organization qualifies as a CASP determines whether you have reporting obligations.

CASP Definition

Under CARF, a Crypto-Asset Service Provider (CASP) is any individual or Entity that, as a business, provides services effectuating Exchange Transactions for or on behalf of customers.

Key definitional elements:

"As a Business"

Services must be provided in a business context:

• Regular, ongoing activity
• For profit or commercial purpose
• Not occasional personal transactions

"Effectuating Exchange Transactions"

The entity must actually facilitate exchanges:

• Executing trades between customers
• Acting as counterparty to customer trades
• Processing exchange orders
• Providing liquidity for exchanges

"For or on Behalf of Customers"

There must be a customer relationship:

• Services provided to third parties
• Customer accounts or relationships maintained
• Acting as agent or intermediary

Types of CASPs

Centralized Exchanges

Traditional cryptocurrency exchanges that:

• Maintain order books matching buyers and sellers
• Hold customer assets in custody
• Execute trades against the exchange or other users

Clear CASPs with full reporting obligations.

Brokers and Dealers

Entities that:

• Buy and sell crypto on their own account
• Provide price quotes to customers
• May or may not hold customer assets

CASPs regardless of custody model.

Crypto ATM Operators

Companies operating kiosks that:

• Exchange fiat for crypto (and vice versa)
• Process transactions for walk-up customers

CASPs with reporting obligations for each transaction.

OTC Desks

Over-the-counter trading services:

• Large block trades for institutional clients
• Principal or agency trading
• May operate as separate business or division of exchange

CASPs with full reporting requirements.

Payment Processors

Services enabling crypto payments:

• Merchant payment processing
• Conversion of crypto to fiat for merchants

May be CASPs if they effectuate the exchange (vs. pure payment transmission).

Business Model Analysis

Borderline Cases

Wallet Providers

Pure wallet providers that only store assets are NOT CASPs. However, wallets with integrated swap or exchange features ARE CASPs for those functions.

DEX Aggregators

Platforms that route orders to decentralized exchanges may be CASPs if they:

• Add functionality beyond pure routing
• Hold funds during transaction execution
• Provide price improvement or execution services

Peer-to-Peer Platforms

P2P platforms may be CASPs if they:

• Hold funds in escrow
• Facilitate the exchange process
• Provide matching services beyond mere introduction

Threshold Considerations

CARF does not include de minimis thresholds for CASP status. Even small operations that meet the definition have reporting obligations.

However, some jurisdictions may implement:

• Simplified reporting for small CASPs
• Extended deadlines for new entrants
• Phased implementation requirements

Compliance Obligations

CASPs must implement comprehensive compliance programs:

Registration

• Register with tax authorities in each jurisdiction with nexus
• Obtain any required licenses
• Designate responsible compliance officer

Due Diligence

• Implement user identification procedures
• Collect self-certifications
• Validate TINs
• Monitor for changes in circumstances

Reporting

• Track reportable transactions
• Generate XML reports
• Submit by required deadlines
• Respond to tax authority inquiries

Record Keeping

• Maintain documentation for required period
• Ensure audit trail for reports
• Retain self-certifications and supporting documents

Conclusion

The CASP definition is broad, capturing most businesses that facilitate crypto exchanges. Organizations should carefully analyze their business models against the definitional criteria. When in doubt, seeking professional guidance early can prevent costly compliance failures later.