Hong Kong: the new law for fiscal transparency of cryptocurrencies

The government of Hong Kong has recently announced its commitment to the implementation of a new law for cryptocurrencies, aimed at strengthening international fiscal transparency and combating cross-border tax evasion. 

The statement was presented during the Global Forum on Transparency and Effective Exchange of Information for Tax Purposes of the OECD, an international body that promotes global standards in the field of automatic exchange of information.

The main objective is to build a reporting system capable of monitoring the movements of cryptocurrencies, while ensuring alignment with international tax standards. 

According to the outlined plan, Hong Kong plans to complete the necessary legislative amendments by 2026 or, if possible, earlier. Subsequently, the first automatic exchange of information with the concerned tax jurisdictions is scheduled for 2028.

The importance of the new law on cryptocurrencies in Hong Kong

Cryptocurrencies today represent one of the most innovative financial instruments and, at the same time, the most complex to regulate. 

Hong Kong, as a global financial hub, finds itself in the position of having to reconcile innovation and regulatory rigor. The new law aims to ensure that crypto-assets are not used to facilitate illicit activities, such as international tax evasion or money laundering.

With this initiative, Hong Kong intends to:

1. Improve international cooperation: the automatic exchange of information with other tax jurisdictions will allow for strengthening the fight against cross-border tax evasion.
2. Promote transparency: the implementation of a structured reporting framework will require market operators and investors to achieve greater compliance.
3. Strengthen the reputation of Hong Kong: the move highlights the city’s willingness to adhere to the global standards promoted by the OECD, thus consolidating its position as a credible and transparent financial hub.

The creation of the reporting framework for criptovalute requires first and foremost local regulatory adjustments. By 2026, Hong Kong intends to finalize the necessary legislative changes to ensure compliance with the requirements of the Global Forum of the OCSE. This process will involve:

• The introduction of new rules: regulations governing the reporting of crypto-assets by industry operators.
• Harmonization with international guidelines: the framework will be aligned with global best practices to avoid divergences between tax jurisdictions.
• Consultation of stakeholders: a constant dialogue with cryptocurrency exchange platforms, digital wallet providers, and other involved entities.

What does it mean for the bull and bear cryptocurrency market?

The decision of Hong Kong to implement a cryptocurrency reporting system represents a significant paradigm shift. Industry operators will need to prepare to comply with new regulations, which will include the obligation to report relevant transactions and to share information with the competent tax authorities.

Such requirements, although more stringent, will help create a safer and more transparent market, reducing the risks of illicit use of cryptocurrencies and providing institutional investors with greater confidence. At the same time, the regulation will act as a deterrent against the use of crypto-assets for evasive purposes, strengthening Hong Kong’s position as a global leader in financial regulation.

The announcement by the Hong Kong government marks an important step towards the regulation of cryptocurrencies with a view to fiscal transparency and international collaboration. 

The completion of the legislative changes by 2026 and the subsequent start of the automatic exchange of information in 2028 represent a clear response to the global challenges posed by crypto-assets. This initiative not only strengthens Hong Kong’s reputation as a transparent financial center, but also lays the foundation for a more fair and effective global tax system.