In recent discussions, an influential trade organization from Hong Kong has called for adjustments to the upcoming crypto taxation regulations set forth by international authorities. This initiative comes ahead of the implementation of new compliance measures designed for digital currency transactions.
Industry Group Advocates for Regulatory Flexibility
On Tuesday, the Hong Kong Financial Services Association (HKFSA) released a statement regarding the new guidelines established by the Organisation for Economic Co-operation and Development (OECD). Their focus centers around the proposed regulatory alterations applicable to the city’s Financial Reporting Standards.
The association outlined its concerns surrounding the implications these new frameworks may have on market players, highlighting potential operational risks and complications in compliance.
Moreover, the HKFSA provided general support for the intended changes but cautioned that stricter documentation procedures for closed companies should be moderated. “While we endorse the intention behind a consistent six-year data retention guideline,” they cautioned, “the burden placed on individuals after company closure raises significant concerns.”
They emphasized that imposing personal liability on executives for record-keeping when their company has dissolved presents numerous real-world challenges. Former executives may not have the necessary support or resources to manage sensitive information once operations cease.
Consequently, the group proposed that the government allow the appointment of a trusted third-party entity—such as a liquidator—to handle these responsibilities, instead of imposing indefinite personal accountability.
The association also raised alarms about the unlimited per-account penalties for minor discrepancies, arguing that such measures could result in unfairly steep fines for technical malfunctions that may affect large numbers of accounts without any intention to deceive.
To mitigate this risk, they recommended instituting a “reasonable cap” on penalties associated with unintentional errors to ensure serious offenses receive appropriate sanctions, while minor mistakes do not lead to disproportionate consequences.
Additionally, the industry group suggested implementing a simplified registration process for Crypto-Asset Service Providers (CASPs) that frequently submit Nil Returns. This could help lower administrative burdens while still complying with oversight requirements.
Hong Kong’s Ambitious Plans for a Crypto Ecosystem
Hong Kong is among the 76 regions committed to adopting the new global crypto reporting standards aimed at improving tax transparency. This framework, called the Crypto Asset Reporting Framework (CARF), is pivotal in curbing tax evasion related to digital currencies, mirroring established systems for traditional financial assets.
The CARF aims to ensure that crypto asset holders are subjected to consistent reporting regulations worldwide, helping expose tax discrepancies. In addition, Hong Kong is set to be one of the key hubs that will begin sharing cross-border crypto reporting data by 2028.
Recently, local authorities have doubled down on efforts to enhance the framework required for fostering a robust digital asset economy within Hong Kong, part of its broader strategy to position itself as a global leader in the cryptocurrency sector.
According to sources, the city is also examining regulations that would allow traditional financial entities, such as insurance firms, to allocate funds towards cryptocurrencies, thereby diversifying investment opportunities. The Hong Kong Insurance Authority has put forth guidelines that may enable insurance capital flows into digital assets, including stablecoins.
Furthermore, the Hong Kong Monetary Authority (HKMA) is anticipated to issue initial licenses for stablecoin developers in the forthcoming months. In August, the HKMA released the Stablecoins Ordinance, which mandates that any entity intending to launch stablecoins tied to the Hong Kong Dollar or its equivalents must acquire a license.
Many entities have already submitted applications for these licenses, with over 30 submissions recorded for 2025, including significant players like Reitar Logtech and the international division of Ant Group, a major financial technology firm from mainland China.
