30s Summary

Hong Kong is proposing to offer tax exemptions on cryptocurrency earnings for hedge funds, family investment firms, and private equity groups. It aims to bolster its reputation as a major financial center for crypto, and compete with Singapore and Switzerland. The tax break could lead to significant benefits for Hong Kong’s digital economy. This move comes as competition from Singapore and Switzerland increases, with both attracting global capital. The proposal could strengthen the Asian crypto market by inviting more investment into Hong Kong.

Full Article

Hong Kong recently proposed to offer tax exemptions on cryptocurrency earnings for hedge funds, family investment firms, and private equity groups. It’s an effort to boost its reputation as a prominent financial center for crypto. There’s currently a six-week consultation under way that is considering these exemptions, as well as for investments in private credit, overseas property, and carbon credits, according to a report by the Financial Times.

By doing this, Hong Kong hopes to compete with other local hubs like Singapore, where similar tax benefits are on offer, and Switzerland, which is famous for its expertise in managing wealth. If passed, this tax break could mean major benefits for Hong Kong’s digital economy as the city looks to bring in more global capital.

Hong Kong’s move to drop crypto taxes has come at a time when competition from Singapore and Switzerland is growing, with both making significant strides in attracting global capital. Singapore launched its Variable Capital Company (VCC) framework in 2020, which currently hosts over 1,000 funds. Meanwhile, Hong Kong has been promoting its Open-Ended Fund Company (OFC) structure since 2020 and has launched over 450 funds under this scheme.

This proposed tax break could turn Hong Kong into a feasible offshore financial center by easing tax burdens on digital assets and other alternatives. Hong Kong aims to establish itself as a leader among the top financial centers in the Asia-Pacific region and beyond. Financial experts suggest that this move could further strengthen the Asian crypto market by encouraging more investment into the city if it is accepted.

Crypto analyst Justin d’Anethan mentioned on Nov. 18 that Hong Kong is “offering tax breaks and speeding up crypto licenses,” seeing it “as a growth engine.” The news about this tax proposal follows the recent announcement by ZA Bank, Hong Kong’s largest digital bank, launching a new cryptocurrency service for everyday users, allowing them to buy and sell Bitcoin (BTC) and Ether (ETH) directly using their ordinary currency.

Hong Kong residents with a ZA Bank account can take a risk assessment to use this new crypto service, linked with the bank’s application. Calvin Ng, an alternate chief executive at ZA Bank, said that they launched the service in a partnership with HashKey, a crypto exchange, to ensure they meet all regulatory requirements and support the fusion of crypto with traditional banking.