Hong Kong Digital Asset Tax Regulation and Supervision Analysis Report No. 1 | Evolution and Development

Written by: Xie Yancen

【Scope of Research】This report systematically reviews Hong Kong’s tax rules for digital assets from 2020 to the present. We analyze various guidelines issued by the Hong Kong Inland Revenue Department, regulatory documents from the Securities and Futures Commission and the Hong Kong Monetary Authority, relevant ordinances passed by the Legislative Council, and official policy declarations, aiming to provide readers with a comprehensive and clear regulatory landscape.

【Key Conclusions】Looking back at the development over these years, Hong Kong’s digital asset tax regulation has followed a clear path: first establishing basic principles through DIPN 39 in 2020; then gradually supplementing regulatory documents (for trading platforms, staking services, stablecoins) to support tax administration; next implementing a crypto asset reporting framework (CARF) through legislation; and finally offering tax incentives via policy declarations. Overall, the trend is toward more standardized, transparent regulation, increasingly aligned with international standards.

Chapter 1: Evolution of Hong Kong’s Digital Asset Tax Regulation

1.1 Foundation Period (2020): Establishing Basic Principles

2020 marked a pivotal year for Hong Kong’s digital asset tax regulation. The IRD issued a revised “Interpretation and Guidance Note on Taxation of Digital Assets No. 39” (DIPN 39), the first official guidance on digital asset taxation. Its core contribution was clarifying how digital assets are treated under Hong Kong’s tax system: relying on Section 14 of the Inland Revenue Ordinance, adhering to the principle of territorial source taxation, and taxing profits generated or derived from Hong Kong.

With this fundamental principle in place, the IRD also established a basic tax framework covering common scenarios such as the nature of digital asset transactions (business profits vs. capital gains), airdrops and forks, crypto salaries, ICOs, etc. This framework was pioneering at the time, laying the groundwork for subsequent detailed rules. Although initially covering only basic transaction scenarios, it was the first to clarify the tax attributes of digital assets in 2020, enhancing compliance certainty.

1.2 Regulatory Support Period (2023-2025): Improving Regulatory Infrastructure

As the digital asset market developed, Hong Kong gradually built a comprehensive regulatory infrastructure. While not directly tax-related, these documents support tax enforcement. In June 2023, the SFC issued the “Guidelines for Virtual Asset Trading Platform Operators,” clarifying licensing requirements, client asset segregation, transaction record keeping (not less than 7 years), and regulatory cooperation mechanisms, providing essential data for tax authorities’ assessment, audit, and collection.

In April 2025, the SFC and HKMA jointly released regulations on virtual asset pledge services, specifying standards for different types of institutions engaging in pledge activities, client asset segregation, and disclosure requirements, especially emphasizing record-keeping of earnings for at least 7 years, enabling coordinated regulation and tax enforcement. In August 2025, the “Stablecoin Ordinance” officially took effect, Hong Kong’s first dedicated regulation for stablecoins, clarifying tax responsibilities of issuers and service providers, defining taxable activities and tax treatment standards, aligning with Hong Kong’s Inland Revenue Ordinance and related virtual asset tax rules.

1.3 International Alignment Period (2025-2026): Cross-Border Information Exchange

In December 2025, the Financial Secretary’s Office and the IRD jointly issued a consultation document on the “Implementation of the Crypto Asset Reporting Framework and Revision of Common Reporting Standards,” marking Hong Kong’s formal inclusion of crypto assets into its cross-border tax information exchange system. The document states that Hong Kong plans to submit relevant legislation proposals to the Legislative Council in 2026, start collecting CARF-related information in 2027, and implement automatic information exchange with partner jurisdictions in 2028.

In January 2026, the Legislative Council released the “Taxation (Amendment) Bill (Implementing the Crypto Asset Reporting Framework and Revision of CRS),” further clarifying core requirements for crypto asset reporting, CRS revision points, compliance responsibilities, penalties, and coordination with virtual asset pledge services. The key focus of this phase is to connect with the OECD’s Crypto Asset Reporting Framework (CARF) and incorporate crypto assets into the cross-border tax information exchange system.

1.4 Tax Incentive Period (2025): Providing Policy Support

In June 2025, the Financial Secretary’s Office issued the “Digital Asset Development Policy Declaration 2.0,” another core policy document marking a shift from “framework building” to “implementation details” for Hong Kong’s digital asset industry. From a tax perspective, it continued Hong Kong’s supportive stance, including two major tax incentives: first, exemption of stamp duty on tokenized ETFs; second, expanded scope of profits tax exemptions.

The stamp duty exemption for tokenized ETFs clarifies that all ETFs listed on the Hong Kong Stock Exchange are exempt from stamp duty upon transfer, promoting the development of tokenized markets. The scope of profits tax exemption was further expanded to include qualified transactions involving private funds and family office investment vehicles (FOIV), reducing tax costs for institutional investors participating in digital asset trading.

1.5 Evolution Logic and Trends

Reviewing this entire evolution, a clear regulatory path emerges: from establishing basic principles to improving regulatory infrastructure, from domestic tax rules to cross-border information exchange, from standardized regulation to tax incentives.

Future core trends are characterized by three features:

1. Standardization of rules (from scattered guidelines to comprehensive legislation + detailed rules), with increasing regulatory strength and a more complete rule system;

2. Transparency in reporting requirements (mandatory third-party reporting + regulatory collaboration), with enhanced technological adaptation, and greater use of regulatory data by the IRD to improve efficiency;

3. Globalization of regulation (cross-border information exchange + implementation of OECD frameworks), with deeper international coordination and gradual convergence of global digital asset tax standards.