Hong Kong is taking strategic steps to cement its position as a leading cryptocurrency financial hub by proposing exemptions on capital gains tax for these digital assets. This initiative, which encompasses hedge funds, private equity, and family investment vehicles, is now open for public consultation for a period of six weeks.
The objective of this policy is to give Hong Kong a competitive advantage over other financial hubs like Singapore and Switzerland, which already offer tax incentives that attract significant international investment. At the core of Hong Kong’s strategy is the expectation that such incentives will attract more global liquidity to the city, thereby boosting its digital economy.
For instance, Singapore has had a Variable Capital Company (VCC) structure in place since 2020, which has already attracted over 1,000 funds. In response, Hong Kong has been promoting its Open-Ended Fund Company (OFC) structure since October 2023 and has already introduced more than 450 funds under this framework.
Furthermore, Hong Kong’s proposal also includes exemptions for investments in other sectors, such as private credit, offshore property, and carbon credits. Experts believe that this measure could make Hong Kong an even more appealing offshore financial hub by alleviating the tax burden on investments in digital and alternative assets.