Understanding which crypto-assets fall within CARF's scope is essential for accurate reporting. The framework uses a functional definition that captures most digital assets while excluding certain categories that are covered by other reporting regimes.

Definition of Relevant Crypto-Assets

CARF defines a Relevant Crypto-Asset as a digital representation of value that relies on a cryptographically secured distributed ledger or similar technology to validate and secure transactions. This broad definition is intentionally technology-neutral to capture both current and future crypto-assets.

Key elements of the definition:

  • Digital representation of value: The asset must represent economic value in digital form
  • Cryptographic security: The technology must use cryptographic methods
  • Distributed ledger: Transactions must be validated through distributed consensus
  • Similar technology: Functional equivalents are included even if not strictly DLT-based

Covered Assets

The following crypto-asset categories are clearly within scope:

Major Cryptocurrencies

All significant cryptocurrencies including Bitcoin, Ethereum, and similar assets are covered. This includes both proof-of-work and proof-of-stake currencies.

Altcoins and Tokens

Alternative cryptocurrencies and tokens issued on blockchain platforms (such as ERC-20 tokens) are included regardless of their market capitalization or trading volume.

Wrapped Tokens

Tokens that represent other crypto-assets (like Wrapped Bitcoin) are treated as relevant crypto-assets themselves, distinct from the underlying asset.

Governance Tokens

Tokens that provide voting rights in decentralized protocols are covered, even if they don't represent direct economic value.

Stablecoins and Tokens

The treatment of stablecoins under CARF requires careful analysis:

Fiat-Backed Stablecoins

Stablecoins backed by fiat currency reserves (like USDC or USDT) are generally covered by CARF. However, if the issuer is a financial institution subject to CRS, certain reporting may occur under CRS instead.

Crypto-Backed Stablecoins

Stablecoins collateralized by other crypto-assets (like DAI) are clearly within CARF scope.

Algorithmic Stablecoins

Stablecoins that maintain their peg through algorithmic mechanisms are covered, regardless of their stability performance.

E-Money Exclusion: Electronic money that qualifies as e-money under applicable financial services regulation may be excluded from CARF if already covered by CRS. However, most stablecoins don't meet e-money definitions.

NFT Treatment

Non-Fungible Tokens present unique classification challenges under CARF:

NFTs as Relevant Crypto-Assets

NFTs are covered by CARF when they:

  • Can be used for payment purposes
  • Are used for investment purposes
  • Represent fractional ownership that can be traded

Excluded NFTs

NFTs may be excluded when they:

  • Represent unique art or collectibles without investment character
  • Are used solely for in-game items or personal use
  • Cannot be transferred or exchanged for value

The determination depends on the NFT's actual use and characteristics, not merely how it's marketed. High-value NFTs traded speculatively are likely to be treated as relevant crypto-assets.

Exclusions

Certain digital assets are explicitly excluded from CARF:

Central Bank Digital Currencies (CBDCs)

Digital currencies issued by central banks are excluded as they'll be covered by existing frameworks for fiat currency.

Assets Already Under CRS

The following are excluded to avoid duplicate reporting:

  • Specified Electronic Money: E-money meeting CRS definitions
  • Central Securities Depository tokens: Tokenized securities already reported under CRS
  • Investment fund tokens: When the underlying fund is CRS-reportable

Closed-Loop Assets

Digital assets that cannot be transferred, sold, or exchanged outside a closed ecosystem are excluded. Examples include:

  • Loyalty points usable only within one merchant's ecosystem
  • Gaming currencies that cannot be converted to fiat or crypto
  • Internal corporate tokens with no external transferability

Edge Cases

Several asset types present classification challenges:

Security Tokens

Tokens representing securities may fall under CRS, CARF, or both depending on their structure and regulatory classification in each jurisdiction.

Utility Tokens

Tokens providing access to services are covered when they can be traded on secondary markets. A token usable only for specific services might be excluded if it lacks exchange value.

DeFi LP Tokens

Liquidity provider tokens received from DeFi protocols are generally covered as they represent value and can be traded.

Staked Assets

The underlying staked crypto-assets remain covered. Derivative tokens received during staking (like stETH) may create additional reporting events.

Practical Classification Approach

When determining coverage, CASPs should:

  1. Start with the presumption that digital assets are covered
  2. Analyze whether any exclusion clearly applies
  3. Document the reasoning for any exclusion decisions
  4. Monitor for regulatory guidance on edge cases
  5. Err on the side of reporting when classification is unclear

Conclusion

CARF's broad definition ensures most crypto-assets are covered. The exclusions are narrow and specific. CASPs should maintain asset classification processes and stay current with regulatory guidance as the treatment of novel asset types continues to evolve.

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