YEREVAN (CoinChapter.com) — Hong Kong has introduced a plan to exempt cryptocurrency gains from taxes. The proposal targets crypto hedge funds, private equity firms, and family offices. This move aims to strengthen its position as a global financial hub.
The government released a 20-page proposal highlighting taxation as a key factor for asset managers when selecting business locations. Alongside cryptocurrency gains, the exemptions would also apply to private credit, overseas property, and carbon credits. A six-week consultation is underway to assess responses from stakeholders.
Hong Kong: Competing with Singapore and Regional Rivals
The Hong Kong crypto tax break comes amid growing competition with Singapore, a recognized leader in the region’s financial market. Singapore’s Variable Capital Company (VCC) framework, launched in 2020, has already attracted over 1,000 funds.
Hong Kong’s government counters with its Open-Ended Fund Company (OFC) structure, introduced in October 2023. Since its launch, investors have set up over 450 funds, aiming to match the flexibility and tax benefits offered by Singapore.
Experts emphasize the importance of the tax exemptions. Darren Bowdern, head of asset management tax at KPMG, noted that these changes could align Hong Kong with other global hubs like Luxembourg. Such measures aim to reassure investors and eliminate concerns about tax liabilities on digital and alternative assets.
Wealth Management and Crypto Integration
Family offices in Hong Kong already allocate 20% of their portfolios to digital assets, according to Deloitte China. Tax exemptions for digital assets could further encourage these allocations. Wealthy investors, particularly from mainland China, are exploring alternatives amid stricter regulatory conditions at home.
On Nov. 18, crypto analyst Justin d’Anethan noted that Hong Kong is “offering tax breaks and expediting crypto licenses,” describing these measures as a key “growth engine” for the city’s financial sector.
Singapore, meanwhile, faces scrutiny for money laundering risks. This has slowed the setup of family offices, giving Hong Kong an opportunity to attract more investors.
Crypto Initiatives by Major Players
In addition, Hong Kong’s tax exemption proposal coincides with developments in its financial sector. ZA Bank, the city’s largest digital bank, launched a crypto trading service on November 25. The service allows residents to trade Bitcoin and Ether through the bank’s mobile app.
ZA Bank partnered with HashKey to meet regulatory requirements. This collaboration highlights Hong Kong’s broader focus on integrating digital assets into traditional banking systems.
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