Hong Kong waives tax on cryptocurrency gains for sophisticated investors

All eyes on Hong Kong as the city turns to crypto. Image: Shutterstock.

Hong Kong will exempt gains on crypto-assets and other investments for sophisticated investors in order to increase the appeal of this region as a hub for wealth management.

The Financial Services and Treasury Bureau has released a consultation paper proposing to expand capital gains exemptions by including overseas property, carbon credits and private credit. Reuters reported Thursday. 

These exemptions will apply to private funds as well as eligible investment vehicles for single family offices. The proposal released on Thursday clarifies the current situation. Hong Kong’s crypto-plans.

If the proposal is approved, the exact date of the implementation of the new policy remains unclear. Hong Kong's central bank did not immediately return a request for comment.

It also proposes extending tax exemptions to pension and endowment funds, broadening the scope of assets eligible under the city's fund and family office regimes, per the report.

Hong Kong currently offers a number of tax incentives, like a profit tax exemption for certain private funds. However, the proposal extends these benefits to investments that are crypto-related, in an effort to promote innovation within blockchain technology and finance.

The announcement comes at a time when institutional investors have been increasingly interested in Bitcoin. In January, the U.S. approved multiple Bitcoin spot exchange-traded fund.

Special Administrative Region of China tries to tap into this excitement by making domestic investment more attractive to people with large pockets.

Christopher Hui said last month that Hong Kong wants to make sure it has the “right conducive environment for blockchain, in particular their financial applications.”

“We are being asked all the time … what are the incentives … from the government in terms of growing this sector,” Hui said during a keynote speech at Hong Kong's FinTech Week.

It also builds upon efforts to encourage the development of digital resources in the area.

In the last year, under the Securities and Futures Commission’s licensing scheme for platforms trading virtual assets, the federal government has implemented an accreditation framework. Virtual Asset Trading platforms are required to adhere to stringent standards of investor protection.

Stablecoins are also a focus of the city’s regulation. The new framework requires stablecoin issuers by 2024 to have a physical presence and to hold reserve funds in Hong Kong banks.

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