CARF edge cases: DeFi front-ends, unhosted wallets, and retail payments
Most CARF questions aren't about the easy 90%. Here's how the framework treats DeFi interfaces, withdrawals to self-custody, and payments for goods.
Published6 min read
Crypto Tax
The straightforward part of CARF, a user buys and sells on your centralised venue, is easy to reason about. The questions that keep compliance teams up are the edges: the DeFi front-end, the withdrawal to a wallet you don't control, the coffee bought with crypto. None of them are as exotic as they first look, but each needs a deliberate answer.
FAQs
- Does CARF apply to DeFi?
It can. CARF targets providers that facilitate transactions for users, which can include front-ends to decentralised protocols. The test is what service you provide to the user, not whether settlement happens on a protocol, so each product should be mapped to that question.
- Are withdrawals to unhosted wallets reportable under CARF?
Certain transfers to wallets outside the regulated system are reportable, so that value doesn't disappear from the record at the edge. You need to identify which outbound transfers qualify and capture the data when they happen.
- Is spending crypto on goods reportable under CARF?
Yes, a payment for goods or services is a disposal, and CARF brings retail payments above a set value into scope. Reporting has to recognise the payment, apply the threshold, and value it in the right currency.
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