Hong Kong is preparing to introduce a policy by the end of the year to extend tax incentives to family offices and private funds investing in crypto on behalf of wealthy clients.
Christopher Hui, Hong Kong's secretary of financial services and treasury, said China's special administrative region wants to make sure it has a “friendly environment for blockchains, especially their financial applications.”
“We are always being asked… what incentives are there from the government to grow this sector…
Hong Kong offers tax incentives to certain private funds and family investment vehicles that meet certain requirements and invest in designated areas.
This includes exemption from capital gains tax at the standard rate of 16.5%, while interest for private equity managers is taxed at 0%. Additionally, certain transactions may benefit from stamp duty relief.
The upcoming policy aims to support the development and investment of crypto-to-regulated products as the region tries to shape itself into a global hub for digital assets.
Hong Kong's move to regulate the trading of virtual assets laid the groundwork for a formal licensing system that began two years ago with a pilot program under the Securities and Futures Commission.
The Virtual Value Trading Platform (VATP) regime, implemented in June 2023, aims to enhance investor protection and strengthen compliance standards for digital asset platforms.
Continuing that particular policy, Hui said the government will introduce a stable coin policy on the “production front” by the end of the year.
Under the new framework, issuers of foreign fiat-referenced stablecoins will have to establish a physical base in Hong Kong, hold reserves in local banks and be prohibited from paying interest to holders, Decrypt previously reported.
On the service front, Hong Kong will start regulating the watchdogs sometime next year by “putting in place the correct regime”, consulting with market stakeholders on the cryptocurrency business, Hui said.
Exactly how he intends to do it is not yet clear. The SFC did not immediately respond. Decrypt's Request for feedback.
“We can further develop this market by adopting a broader service regulation,” he said.
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