The Cryptocurrency Community of Hong Kong (CCHK) has expressed its concerns regarding the implementation of global taxation regulations within Hong Kong, specifically regarding how the authority will implement the framework on a practical level. The primary concern of the CCHK is related to the recently released Crypto-Asset Reporting Framework (CARF), which is part of an initiative by the Organisation for Economic Co-operation and Development (OECD) to facilitate the automatic exchange of information between countries regarding taxation of all forms of crypto-assets.
As stated by Hong Kong government representatives, the CARF will enhance Hong Kong’s position as a leading global financial centre. Since multinational companies will be evaluated based on how effectively they enforce the CARF and not just if they have the CARF.
In a response to the Financial Services and Treasury Bureau, the CCHK has requested that the government take additional actions to prepare for the rollout of CARF, to ease the transition for the crypto-asset community, and to continue promoting Hong Kong’s reputation as a leading financial centre.
The CCHK supports the objective of the proposed CARF being tax transparency; however, it believes that certain aspects of the proposed regulations will present significant operational pressures, create ambiguous legal environments, and establish disproportionate penalties for non-compliance. The CCHK represents professional organisations involved throughout the securities, futures, and cryptocurrency industries and, in its comments, has incorporated the aim of maintaining Hong Kong’s status as one of the premier global financial centres while ensuring compliance with international obligations of the OECD.
CARF aims to fill in the gaps left by traditional tax reporting systems by providing a way to record and report on cryptocurrency activity in a way that is separate from a traditional financial account. The CARF framework will require all Crypto Asset Service Providers to record and report detailed user and transaction information to their governments, and to automatically share that information with all other jurisdictions participating in CARF.
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Hong Kong is one of 76 markets worldwide that have committed to CARF and will be among the first 27 jurisdictions to begin sharing information in 2028. The government plans to amend its laws by 2026. The government held a public consultation between late 2017 and early 2018 to gather input before making legislative changes.
Progress is being made, but some participants in the industry are concerned about data collection requirements under CARF. While there appears to be a clear direction forward for the CARF framework, the details will determine the success or failure of the new framework.
A key point of concern is the collection of data. According to the Association, most businesses would prefer a “broader approach,” in which businesses collect data on reportable and non-reportable clients upfront.
However, the Association believes that unless the law provides for specific legal protections, companies may face conflicts between the collection of data required by CARF and Hong Kong’s Personal Data Privacy Ordinance regarding information held for clients who are not yet reportable.
