Hong Kong Considers Removing Taxes on Cryptocurrency

The Hong Kong government is preparing to exempt private investment firms, hedge funds, and family offices from taxes on income earned through cryptocurrency transactions.  

This proposal aims to attract foreign capital and reinforce Hong Kong’s status as Asia’s leading cryptocurrency and financial hub. It also echoes recent promises from Donald Trump’s incoming administration to introduce similar crypto tax incentives.

Related: Trump’s Impact on the Crypto Market: Expert Opinions

Over the past two years, Hong Kong has made significant strides toward establishing itself as an international hub for cryptocurrency activity. Local officials have emphasized that tax policies are a key factor for attracting asset managers when choosing a region for their operations. This new initiative aims to create a more favorable environment for investment. 

Related: Hong Kong Opens the Gates for Crypto Investors

Patrick Yip, vice chair and international tax partner at Deloitte China, stated that this measure will provide much-needed certainty for family office investments. 

This is an important step in boosting Hong Kong’s status as a financial and crypto trading hub

he said.

Yip also noted that some family offices allocate up to 20% of their portfolios to digital assets, reflecting a growing interest in this sector.

It’s worth mentioning that global competition for cryptocurrency capital is intensifying. For example, Italy recently reduced its tax rate on cryptocurrency transactions from 42% to 28%. 

Meanwhile, Singapore, Hong Kong’s main competitor, has tightened anti-money laundering regulations, slowing the establishment of new family offices.

Related: Singapore’s New President Isn’t a Fan of Crypto

Hong Kong is positioning itself to capitalize on current trends by introducing additional incentives, including tax breaks on private loans, overseas real estate, and carbon credits. The final details of this initiative will be determined following a six-week public consultation period.

Restrictive policies under President Xi Jinping have prompted many wealthy investors from mainland China to explore opportunities abroad. While Singapore has long been the destination of choice, Hong Kong is now offering more flexible conditions to attract this capital. Companies such as Circle are considering expanding into the region, anticipating new stablecoin regulations.

These changes are designed to put Hong Kong on a par with Singapore or Luxembourg, in that there’s no risk of the fund being subject to tax,

said Darren Bowdern, head of asset management tax for Asia at KPMG.

This initiative highlights Hong Kong’s commitment to adapting to the fast-growing cryptocurrency industry and demonstrates the region’s ambition to solidify its role as a global leader in the space.