Hong Kong Offers Tax Breaks to Attract Crypto Funds

Hong Kong introduces tax incentives to attract crypto hedge funds and investors, aiming to strengthen its financial hub status.

Hong Kong has suggested exempting cryptocurrency earnings from taxes for hedge funds, private equity, and family investment entities in order to bolster its position as a global crypto financial hub.

According to the Financial Times, the plan, open for six weeks of input, contains exemptions for investments in private credit, offshore property, and carbon credits.

The program intends to help Hong Kong compete with regional rivals such as Singapore, which offers comparable tax breaks, and Switzerland, which is well-known for its wealth management capabilities.

If enacted, the tax exemption might benefit Hong Kong’s digital sector as it strives to attract more global liquidity.

Competing with regional finance hubs

Hong Kong’s plan to eliminate the cryptocurrency tax comes as it competes with neighbors Singapore and Switzerland.

Singapore launched its Variable Capital Company (VCC) structure in 2020, and it now contains over 1,000 funds.

Hong Kong has pushed its Open-Ended Fund Company (OFC) structure since October 2023, with over 450 funds launched under the concept.

Tax implications

Such a measure might help Hong Kong become a viable offshore financial hub by lowering tax costs on digital and alternative assets.

According to the Financial Times, Hong Kong aspires to be one of the top financial capitals in Asia and worldwide. Analysts believe that if the plan is granted. It will boost the Asian cryptocurrency industry by attracting additional investments into the city.

On November 18, crypto researcher Justin d’Anethan stated that Hong Kong is “offering tax breaks and speeding up crypto licenses,” seeing it as a development driver.

Largest Hong Kong digital bank goes crypto

The tax suggestion comes after ZA Bank, Hong Kong’s largest virtual bank, launched a new crypto service for retail customers. Letting them to purchase and trade Bitcoin (BTC$95,213) and Ether (ETH$3,551.71) using fiat.

According to an official press release issued on November 25, Hong Kong residents with ZA Bank accounts can complete a risk assessment before using the new crypto service linked to the bank’s app.

Calvin Ng, ZA Bank’s alternative CEO, stated that the service was created in collaboration with cryptocurrency exchange HashKey to satisfy regulatory requirements and further the integration of crypto and traditional banking.

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