Hong Kong is considering waiving tax on investment gains from cryptocurrencies for hedge funds, private equity funds, and family offices as it looks to enhance its appeal as a wealth management hub.
The city hopes the move will make it more competitive, with the proposal also including exemptions for investments in private credit, overseas property, and carbon credits.
Hong Kong Proposes Tax Breaks
The proposal is currently open for a six-week consultation, with the Treasury Bureau proposing expanding capital gains tax exemptions to cover carbon credits, private credit, overseas properties, and virtual assets. The initiative aims to keep Hong Kong competitive with regional financial hubs like Singapore, which gives institutions and investors similar tax incentives, and global hubs like Switzerland, which is famous for its wealth management expertise. If implemented, it could significantly enhance Hong Kong’s digital economy as it looks to attract more global liquidity. The proposal states,
“Taxation is one of the key considerations for the wealth asset management sector to decide where to base their operations.”
Increased Competition
Hong Kong’s proposal to remove taxes on crypto comes amid growing competition with rival financial hubs like Singapore and Switzerland. Singapore recently introduced its Variable Capital Company (VCC) framework, which houses over 1000 funds. Meanwhile, Hong Kong launched its Open-Ended Fund Company (OFC) in October 2023, with 450 funds operating under the plan.
The move could help Hong Kong develop into a viable offshore financial center by significantly easing the tax burden on digital and alternative assets. The city aims to establish itself among the leading financial centers in the Asia-Pacific region and beyond. Market watchers believe the move could also help boost the Asian crypto ecosystem by encouraging more inflows into the city.
Hong Kong is Asia’s largest hedge fund hub and ranks second in capital under management in private equity funds. The city has over 2,700 family offices, half with assets over $50 million.
Hong Kong’s Largest Digital Bank To Offer Crypto
ZA Bank, the largest digital bank in Hong Kong, has become the first bank in Asia to offer crypto services to retail users. Retail customers can seamlessly trade crypto using HKD and USD through the bank’s app. Retail investors no longer need to switch between apps or platforms to trade crypto. The bank stated the platform offers cryptocurrency trading services exclusively for Bitcoin (BTC) and Ethereum (ETH). It is not clear if the platform will add support for other cryptocurrencies. The bank’s decision to offer cryptocurrencies will attract significant attention from regulators, who will scrutinize the bank. Calvin Ng, Alternate Chief Executive of ZA Bank, said the bank’s plans will comply with necessary regulatory requirements.
“The rise of cryptocurrency presents investors with more diverse asset allocation opportunities. As a bank, we prioritize security and compliance, which is why we’ve partnered with HashKey, a global-leading licensed virtual asset exchange, to meet regulatory standards and deliver bank-grade security in virtual assets trading - our key competitive advantage in the Asian market.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
