Hong Kong authorities will introduce tax breaks on crypto investments for private funds

What’s new? Hong Kong’s Financial Services and the Treasury Bureau intends to expand investment tax incentives for private funds and family offices by including cryptocurrencies in the list of preferential assets. As the department’s chief, Christopher Hui, noted during a speech at the Hong Kong Fintech Week event, such a move will be an additional impetus for the development of the local digital asset market.

Material by The Block

What else is known? Hong Kong, being a special administrative region of the PRC, pursues a cryptocurrency-friendly policy, unlike mainland China. In June 2023, the local government introduced a licensing regime for crypto exchanges to provide retail services. Since then, platforms HashKey, HKVAX, and OSL Exchange have received licenses.

Paul Chan, Hong Kong’s financial secretary, also spoke at Hong Kong Fintech Week. He said that the Securities and Futures Commission (SFC) is currently actively evaluating applications from other crypto platforms, and more licenses will be issued in the coming months.

According to Chan, the Monetary Authority (HKMA), which acts as the central bank, plans to introduce legislation to regulate stablecoins as early as this year. A regulatory sandbox for stablecoin issuers launched by the HKMA has been operating in the region since March.

In addition, the government is reviewing the development of over-the-counter (OTC) trading rules and will hold a second round of consultations next year before introducing a licensing regime for cryptocurrency custodians.

Bitcoin and Ethereum-based spot exchange-traded funds (ETFs) from local issuers began trading on the Hong Kong Stock Exchange (HKEX) in late April. The launch of spot ETH ETFs in Hong Kong took place earlier than in the United States.

In May, Hong Kong authorities ordered Sam Altman’s Worldcoin project to stop collecting citizens’ data. Users can join the project after undergoing an iris scan, which has raised concerns among regulators around the world because biometric data is sensitive.

In July, Hong Kong City Council member Johnny Ng began promoting the idea of including bitcoin in the region’s reserves.

In September, it became known that the HKMA and SFC plan to bring the reporting of OTC crypto derivatives in line with the standards of the European Securities and Markets Authority (ESMA). It is expected that the new rules will come into force by September 29, 2025.

In October, ZA Bank, Hong Kong’s largest virtual bank, was the first digital bank to receive SFC approval for regulated operations, allowing it to support cryptocurrency trading.

At the same time, Hong Kong arrested a group of scammers who stole more than $50 million in cryptocurrencies using deepfakes and social engineering.