Hong Kong has officially joined the OECD’s crypto asset reporting framework, promising to roll out a global crypto tax reporting system by 2028.
The government has informed the OECD Global Forum on Transparency and Effective Exchange of Information in Tax Matters that it will adopt the Framework to Tackling Cross-Border Tax Evasion and Enhancing International Tax Transparency. Legislative changes will start soon, and the clock is ticking.
The framework, which was launched in June 2023, is a global reporting mechanism designed to close loopholes in the taxation of cryptocurrencies. It requires tax authorities to share data annually on their cryptocurrency accounts and transactions involving dent.
Hong Kong’s crypto industry has become “directly relevant” to these efforts, according to the Global Forum. In response, the government will complete the necessary legislative amendments by 2026, ensuring it can meet the deadline for the first reports.
Legislative Reform: The Clock Starts Now
Secretary for Financial Services and the Treasury, Hui Ching-yu, said the framework was crucial to Hong Kong's position as a major international financial centre.
“Implementing the reporting framework is vital to maintaining Hong Kong’s reputation as an international financial and trading centre and reflects Hong Kong’s reputation as a responsible tax authority,” he said.
The government’s plan is straightforward. Amend laws, prepare the industry, and start matic tax reporting. But it’s not just about following orders. Reciprocity is a non-negotiable condition: Hong Kong will only share data with partners that meet strict dent and security standards.
Local lawmakers will also consult with stakeholders and the public during the process. Hong Kong already has experience in this area. Since 2018, the territory has been exchanging financial account information annually with tax authorities around the world. This includes data on foreign bank accounts, which tax authorities use to uncover hidden income.
How Will the OECD Cryptocurrency Tax System Work?
The OECD Crypto Asset Reporting Framework applies to crypto asset service providers, including exchanges, custodial wallets and brokers. These providers will be required to collect detailed information about their users and transactions, including who owns accounts, balances and transaction history.
Once collected, the data will be sent to tax authorities annually and shared across jurisdictions. Any user with tax residency in a participating jurisdiction will find that their crypto activity has been reported. In short, no more hiding behind anonymous wallets or offshore platforms.
Hong Kong’s cryptocurrency exchanges and companies will face significant pressure. They will have to revamp their systems to track, secure, and share this data without violating dent rules. For some players, this will mean a large compliance bill. Smaller exchanges and wallet providers may struggle to keep up.
All Virtual Asset Service Providers (VASPs) are required to comply with Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) rules.
Under the current regime, platforms that trade security tokens must obtain a license from the Securities and Futures Commission (SFC), while platforms that deal with non-security tokens like Bitcoin fall under the AMLO licensing requirements. Both regimes require strict compliance, with no exceptions.
This covers everything from governance to risk management and reserves. Only stablecoins issued by licensed entities will be available to retail investors. To prepare for the upcoming regulations, the Hong Kong Monetary Authority launched a segregated program for stablecoin issuers in March.
Meanwhile, the VASP license process remains competitive. As of press time, only OS Digital Securities Limited and Hash Blockchain Limited have received full licenses. Fourteen other applicants are still in limbo. Interest is growing, but the bar remains high.