The migration of traditional equities onto blockchain infrastructure is shifting from experiment to institutional reality, but according to RegTech firm TAINA Technology, the industry is overlooking a critical consequence: tax compliance may not be ready.
Regulatory momentum is building on both sides of the Atlantic, with the SEC’s proposed Innovation Exemption and the UK’s wholesale market reforms paving the way for round-the-clock trading and tokenised settlement. Yet while capital efficiency dominates the conversation, TAINA warns that a structural problem lurks beneath. When blue-chip equities trade in tokenised form, identifying and tracking beneficial owners becomes far harder, complicating both capital gains reporting and the correct application of withholding tax on dividends.
In response, global tax authorities are pushing two major reporting regimes towards convergence. CRS was built for traditional financial accounts, custodians and brokerage relationships, while CARF was designed as a crypto-native framework for decentralised digital asset activity. Tokenised securities sit squarely between the two, blending traditional financial instruments with a digital asset wrapper and effectively erasing the boundary separating the frameworks.
TAINA notes that many CARF onboarding and due diligence requirements closely mirror the updated CRS 2.0 framework, meaning institutions and Crypto Asset Service Providers can no longer run digital and traditional compliance as separate silos. Fragmentation breeds duplication, higher operational cost and inconsistency, making a unified documentation model essential.
The United States adds a further layer of asymmetry. Its domestic Form 1099-DA regime obliges digital asset brokers to capture gross proceeds and cost basis for US taxpayers, but it leaves non-US investors unaddressed. Foreign investment in traditional US equities is covered by well-established withholding and reporting rules under Form 1042-S, yet if a foreign investor holds a tokenised US equity paying a dividend, no clear mechanism exists for reporting or withholding. This gap partly explains the US commitment to CARF despite its absence from CRS, as Washington seeks data on US taxpayers trading digital assets offshore. Early adopters are targeting information exchanges from 2027, with the US expected to follow slightly later, so these challenges are already surfacing in operational models.
TAINA identifies two core operational hurdles: nuanced entity classification across CRS, CARF and US domestic rules, and the shift from account-based to transaction-level reporting for assets that move continuously across platforms and jurisdictions. Its platform automates classification for individuals and complex entities in real time, validates self-certifications including W-8 and W-9 forms, and performs real-time TIN verification, uniting FATCA, CRS, Form 1099-DA and CARF within a single data architecture.
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