Hong Kong brings 8000 financial institutions under crypto tax reporting rules! What does the latest legislation mean?

A new tax-focused reporting framework for cryptocurrency exchanges and service providers is making headlines in Hong Kong. If approved by the Legislative Council, the proposal will require licensed platforms to collect, verify, and, under certain conditions, share the tax residency information of their users with authorities.

Key obligations under the new reporting proposal

Dubbed the Crypto Asset Reporting Framework (CARF), the regulation mirrors a tax information exchange regime adopted on June 17. In her column published on June 26, Hong Kong lawmaker Priscilla Leung highlighted the similarities between the two regulatory measures.

According to the bill, licensed crypto platforms will be responsible for determining which users fall within the scope of reporting. They are also expected to gather and verify documents demonstrating the country where each user pays taxes. Moreover, platforms will need to register with the relevant public authorities.

All reporting platforms are required to set up an account with the tax department by January 31 each year. Even if a platform ceases operations, detailed record-keeping is still mandatory. The government intends to bring approximately 8,000 additional financial institutions into the system, although most are expected to file nil returns.

The new rules are scheduled to take effect on January 1, 2027, with the first international information exchange slated for 2028.

Mini glossary: CARF is a crypto asset reporting standard developed by the Organisation for Economic Co-operation and Development. Its goal is to promote more systematic cross-border information sharing among tax authorities.

Regulated stablecoin timeline takes shape

Hong Kong’s first regulated stablecoins are expected to debut between mid and late 2026. The Hong Kong Monetary Authority (HKMA), which acts as the city’s de facto central bank, has issued stablecoin licenses to a joint venture by HSBC, Standard Chartered, Hong Kong Telecom, and Animoca Brands, known as Anchorpoint Financial.

These two consortia were selected from a pool of 36 applicants. Both plan to issue stablecoins pegged to the Hong Kong dollar. HSBC previously announced its intention to integrate its stablecoin with its mobile payment app, PayMe.

Separate licenses proposed for virtual asset advisory services

Hong Kong is also moving forward with further financial regulations. The Financial Services and Treasury Bureau, along with the Securities and Futures Commission, has recently completed a one-month consultation on licensing for virtual asset advisory and portfolio management services.

The resulting proposal outlines separate license categories for companies providing virtual asset investment advice and those managing virtual asset portfolios. Firms offering transaction advice or market analysis without holding client assets must maintain at least 100,000 Hong Kong dollars in liquid capital. Those overseeing client assets face a minimum paid-up capital requirement of five million Hong Kong dollars and three million in liquid capital.

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