Hong Kong Industry Group Urges Softer Rules For New Crypto Tax Regime

TLDR

• HKSFPA supports CARF but wants lower burdens for non-reporting crypto entities.
• The group calls for capped penalties and director liability protections.
• Hong Kong plans to start crypto data exchanges by 2028 under CARF.
• HKSFPA seeks stronger personal data protections in crypto reporting laws.

The Hong Kong Securities & Futures Professionals Association (HKSFPA) is asking the government to revise parts of its planned adoption of global crypto reporting rules under the OECD’s Crypto Asset Reporting Framework (CARF). While the group supports stricter transparency and registration, it raised concerns over penalties, data protection, and record-keeping responsibilities.

Support for CARF with Conditions

The Hong Kong Securities & Futures Professionals Association (HKSFPA) has voiced its support for the OECD’s Crypto Asset Reporting Framework (CARF). The framework aims to standardize the global exchange of tax-related information on crypto assets. However, the association is asking the government to revise some requirements during local implementation.

The HKSFPA agrees with key CARF principles such as mandatory registration and expanded transaction reporting. But it warns that current proposals could raise operational and legal risks for institutions. These include concerns about personal liability and uncapped fines for directors.

Concerns Over Penalties and Liability

One of the group’s main concerns is the absence of limits on per-account penalties. It believes these could be too harsh and create compliance uncertainty. The HKSFPA recommends setting clear caps on fines to reduce financial exposure for firms that act in good faith.

Another issue raised is the risk of personal liability for company directors. The group argues that penalties should target institutions rather than individuals unless there is misconduct. It is urging the government to introduce safeguards that shield compliant businesses from excessive enforcement.

Data Privacy and Record-Keeping Flexibility

The HKSFPA is also asking for stronger personal data protections. Under the CARF, crypto asset service providers must collect and share sensitive client information, such as tax residency and transaction records. The group stresses the need to protect this data from misuse or breaches.

In addition, it requests more flexibility in how records are maintained. It suggests allowing companies that shut down to transfer data-keeping duties to regulated third parties. This would ensure compliance without burdening non-operational firms.

Hong Kong’s Role in Global Crypto Tax Reporting

Hong Kong has committed to following the CARF as one of 76 jurisdictions. It is among the first 27 economies planning to start exchanging data by 2028. The framework is designed to close gaps in cross-border tax reporting related to crypto assets.

As part of its crypto regulation plans, Hong Kong has already licensed 11 trading platforms. These platforms, including OSL and Hashkey Global, must meet Know Your Customer (KYC), Anti-Money Laundering (AML), and market conduct standards. The CARF will add to these compliance requirements by introducing international reporting duties.

The HKSFPA’s recommendations come as Hong Kong aims to build trust as a regulated digital asset hub. As countries prepare for data exchange starting in 2027, the group wants rules that support both transparency and fair treatment for crypto firms.

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