Hong Kong is proposing a tax exemption on cryptocurrency gains for hedge funds, private equity, and family investment vehicles, aiming to solidify its position as a leading crypto financial hub.

The proposal, currently under a six-week consultation, also includes exemptions for investments in private credit, overseas property, and carbon credits, according to the Financial Times. This move is part of Hong Kong’s strategy to compete with regional financial hubs like Singapore, which offers similar tax incentives, and Switzerland, renowned for its wealth management expertise.

Analysts believe the initiative could boost Hong Kong’s digital economy by attracting global liquidity. “Hong Kong is offering tax breaks and speeding up crypto licenses,” said crypto analyst Justin d’Anethan on November 18, adding that the city sees crypto as a “growth engine.”

Hong Kong’s Open-Ended Fund Company (OFC) structure, launched in October 2023, has already attracted over 450 funds. The proposed tax exemptions could enhance its appeal as a financial center, positioning the city as a competitive player in the Asia-Pacific region and beyond.

The proposal follows a major announcement from ZA Bank, Hong Kong’s largest digital bank, which recently introduced a crypto service allowing retail users to buy and sell Bitcoin and Ether using fiat. ZA Bank launched the service in collaboration with crypto exchange HashKey to ensure regulatory compliance and foster integration between crypto and traditional banking.

Calvin Ng, alternate chief executive at ZA Bank, described the initiative as part of the bank’s push to merge crypto with conventional financial services.

If approved, the tax breaks could significantly bolster Hong Kong’s appeal to global investors, strengthening its role as a key player in the rapidly evolving crypto industry.

Source: Hong Kong proposes tax breaks to attract crypto hedge funds, investors