Hong Kong has announced its commitment to implementing the Crypto-Asset Reporting Framework (CARF), an initiative to enhance international tax transparency and combat cross-border tax evasion.
This announcement, made at the OECD Global Forum on Transparency and Effective Exchange of Information in Tax Matters, aligns with the global effort to address the crypto-asset market’s challenges.
The CARF, introduced by the OECD in June 2023, extends the Common Reporting Standard (CRS) for the Automatic Exchange of Financial Account Information.
It offers a robust mechanism for jurisdictions to share crypto-related tax data.
The framework mandates the annual exchange of crypto asset accounts and transaction information between jurisdictions where users or controlling persons are tax residents.
Hong Kong Crypto Asset Framework: Can This Combat Tax Evasion?
According to Hui Ching-yu, Secretary for Financial Services and the Treasury, the government aims to complete the necessary local legislative amendments by 2026.
This will pave the way for the first automatic exchange of information with relevant tax jurisdictions in 2028.
The framework’s adoption will be reciprocal, ensuring that partner jurisdictions also adhere to stringent data confidentiality and security standards.
Hui also emphasized the government’s intention to consult stakeholders and the public during the legislative process.
“The government will listen to the views of relevant stakeholders and the public when preparing the necessary legislative amendments.”
Since 2018, Hong Kong has automatically exchanged financial account information with partner jurisdictions under the CRS.
The CARF builds on this legacy, addressing the unique complexities of crypto assets and adapting to their rapid market evolution.
Global Implications and Hong Kong’s Strategic Role
The OECD’s introduction of CARF reflects the global consensus that crypto-related tax transparency is necessary given the asset class’s meteoric rise.
The CARF’s implementation will likely spur increased scrutiny of crypto transactions, compelling crypto-asset firms and users to adapt to stricter compliance requirements.
This shift will enhance the integrity of financial systems worldwide, deterring illicit activities such as money laundering and tax evasion.
A recent report indicates that Hong Kong is intensifying efforts to solidify its status as a premier offshore financial hub by proposing tax exemptions on cryptocurrency profits, private credit, overseas property, and carbon credits.
A six-week consultation is underway to refine these measures.
Complementing this, Hong Kong has embraced the crypto sector, introducing retail and institutional trading regulations, licensing exchanges like Hashkey and OSL, and enabling ZA Bank to offer direct cryptocurrency trading for retail customers.
Hong Kong is also accelerating its efforts to become a global cryptocurrency hub with a fast-track licensing process for trading platforms and new regulatory measures.
The Securities and Futures Commission (SFC) is developing a swift licensing framework, while a consultative panel to support licensed platforms is expected in early 2024.
Since launching its crypto licensing regime in June 2023, firms like OSL Exchange and HashKey Exchange have obtained licenses, allowing them to serve retail investors.
Additionally, Hong Kong is introducing legislation to regulate stablecoin issuers, requiring fiat-referenced stablecoins to be licensed by the Hong Kong Monetary Authority (HKMA) in alignment with global trends.
As part of its ongoing effort, the Hong Kong Monetary Authority (HKMA) has recently launched the Digital Bond Grant Scheme (DBGS) to incentivize the issuance of tokenized bonds by covering up to 50% of eligible expenses, capped at $321,184 per grant.
The post Hong Kong Pledges Crypto Asset Reporting Framework by 2026 to Combat Tax Evasion appeared first on Cryptonews.
