In an effort to strengthen its position as a leading cryptocurrency financial hub, Hong Kong has proposed exempting gains from taxes for hedge funds, private equity, and family investment vehicles. This proposal, currently open for a six-week consultation, also includes exemptions for investments in private credit, overseas property, and carbon credits.
The Proposal: A Step Towards Competitiveness
According to a report by the Financial Times, the initiative aims to help Hong Kong compete with regional rivals like Singapore, which provides similar tax incentives, and Switzerland, which is renowned for its wealth management expertise. By exempting cryptocurrency gains from taxes, Hong Kong seeks to attract more global liquidity and enhance its digital economy.
Competing with Regional Finance Hubs
Hong Kong’s proposal to scrap the crypto tax comes amid increasing competition with rivals Singapore and Switzerland. Singapore introduced its Variable Capital Company (VCC) framework in 2020, which now houses more than 1,000 funds. Hong Kong has promoted its Open-Ended Fund Company (OFC) structure since October 2023, launching over 450 funds under the plan.
| Regional Finance Hub | Tax Incentives |
| — | — |
| Singapore | Variable Capital Company (VCC) framework |
| Switzerland | Wealth management expertise |
| Hong Kong | Proposed exemption of cryptocurrency gains from taxes |
Tax Implications: A Viable Offshore Financial Center
Such a move could help make Hong Kong a viable offshore financial center by easing taxation burdens on digital and alternative assets. According to the Financial Times, Hong Kong aims to establish itself as a peer among leading financial centers in the Asia-Pacific region and beyond.
Analysts’ Views: A Growth Engine for the Asian Crypto Market
Analysts suggest that the move may bolster the Asian crypto market by encouraging more inflows into the city if the proposal is approved. On Nov. 18, crypto analyst Justin d’Anethan said, "Hong Kong is ‘offering tax breaks and speeding up crypto licenses,’ seeing it ‘as a growth engine.’"
ZA Bank Launches Crypto Service for Retail Users
The tax proposal follows a recent announcement by ZA Bank, Hong Kong’s largest virtual bank, launching a new crypto service for retail users. This allows them to buy and sell Bitcoin (BTC) and Ether (ETH) directly using fiat.
According to an official Nov. 25 news release, Hong Kong residents with ZA Bank accounts can undergo a risk assessment to use the new crypto service linked with the bank’s app. Calvin Ng, alternate chief executive at ZA Bank, said the service was launched in partnership with crypto exchange HashKey to meet regulatory requirements and push toward merging crypto with traditional banking.
Merging Crypto with Traditional Banking
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