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Crypto exchanges and service providers might soon be required to collect and share tax-residency data on their users in Hong Kong.
Hong Kong lawmakers are considering passing a bill that sets up a way for tax authorities to see crypto activity for the first time ahead of the launch of the country’s first regulated stablecoins.
What does the new crypto reporting bill require?
The Crypto-Asset Reporting Framework (CARF) bill is currently being reviewed at the Legislative Council, following the structure of a related tax-information-sharing law that passed on June 17.
Lawmaker Priscilla Leung wrote in Ming Pao on June 26 that the CARF legislation has a similar compliance setup to the recently amended Tax Ordinance.
Under this bill, licensed crypto platforms must identify which users must be reported to tax authorities, gather and check documents that show where users pay taxes and they must be registered with the government.
All reporting platforms must create an account with the tax department by January 31 each year.
These platforms will also be required to keep detailed records, even if the business closes down. The government plans to add about 8,000 more financial institutions to the reporting system. However, most of them will likely file empty returns.
The rules are set to start on January 1, 2027, with the first information exchange happening in 2028.
When will Hong Kong’s first regulated stablecoins launch?
Hong Kong’s first regulated stablecoins are expected to reach the market between mid-2026 and the end of the year. The Hong Kong Monetary Authority (HKMA) granted stablecoin licenses to the Hongkong and Shanghai Banking Corporation Limited (HSBC) and Anchorpoint Financial Limited, a joint venture backed by Standard Chartered, Hong Kong Telecom, and Animoca Brands.
These two licensees were chosen from 36 applicants. Both plan to issue stablecoins tied to the Hong Kong dollar and HSBC has said it plans to connect its stablecoin to its PayMe mobile app.
The HKMA’s Chief Executive, Eddie Yue, said the licensed issuers will focus on areas like cross-border payments, local payments, and tokenized asset trading because they have strong banking backgrounds.
In a separate development, the Financial Services and the Treasury Bureau and the Securities and Futures Commission recently completed a one-month consultation period for licensing virtual asset advisory and management services.
The emerging proposal will create new separate licenses for firms advising on virtual assets (VA advisory) and those managing VA portfolios (VA management).
Firms that provide trading advice or market analysis without holding client assets must maintain at least HK$100,000 in liquid capital under the proposed rules while those that do hold client assets face a HK$5 million paid-up share capital threshold and HK$3 million in liquid capital.
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