Author: Bitkoala Finance
Yes, there is good news again for Hong Kong’s virtual asset market.
Bitkoala learned that Hong Kong’s virtual asset investment will not be subject to capital gains tax, which is very attractive to global investors. In fact, Hong Kong’s virtual asset market has launched many preferential measures, and this article will review a few for you.
What commendable initiatives in Hong Kong’s virtual asset market are worth paying attention to?
1. Supervision first, compliant operation: Hong Kong's virtual asset market has been continuously developing and improving in recent years to ensure orderly operation and protect the interests of investors. Since June 1, 2023, the Hong Kong Securities and Futures Commission has begun accepting license applications for virtual asset trading platforms, which means that institutions operating virtual asset businesses in Hong Kong must obtain a license from the Hong Kong Securities and Futures Commission and be regulated by it. In fact, it is this licensing system that enables every virtual asset exchange operating in Hong Kong to operate in compliance.
2. Full collaboration among regulatory agencies: Another point that few people have noticed is that the collaboration among various regulatory agencies in Hong Kong is very good. The Hong Kong Securities and Futures Commission (SFC) has issued a regulatory framework for virtual asset trading platforms, providing a clear legal and regulatory environment for virtual asset transactions. The framework includes compliance requirements for platform operations to ensure the safety of investors' funds and the fairness of the market. The Hong Kong Monetary Authority (HKMA) has introduced a regulatory sandbox mechanism that allows financial technology companies to test their virtual asset products and services in a controlled environment, thereby reducing regulatory barriers in the innovation process. In terms of stablecoins, the Hong Kong Monetary Authority has clearly pointed out that the nature of certain types of virtual assets in stablecoins is more likely to have payment functions, or may bring risks that are different from other virtual assets, such as whether the mechanism used to provide value support is robust, or the impact on real economic activities when the stablecoin payment function is blocked. Whether regulation is needed is also being considered.
3. Emphasis on talent cultivation: The Hong Kong government and financial institutions actively promote the cultivation of financial technology talents, establish financial technology-related courses in cooperation with universities, hold various industry forums and training, and provide talent support for the virtual asset market. In addition, Hong Kong has strengthened cooperation with other countries and regions in virtual asset supervision and signed a number of memorandums of understanding (MoUs) to promote the legalization and standardization of cross-border virtual asset transactions. The Hong Kong government and financial institutions strongly support the application of blockchain technology in the financial field. By funding research projects and technical pilots, they promote the application of blockchain technology in transaction settlement, supply chain finance, etc., and improve the efficiency and transparency of the virtual asset market.
VAT-free investors favor
At this stage, although Japan and Australia have been vigorously developing the virtual asset market earlier than Hong Kong, both Japan and Australia need to pay capital gains tax, and the relevant taxes will be included in the comprehensive tax rate calculation. The comprehensive tax rates in Japan and Australia can be as high as 50% and 40% respectively. For investors, investment returns are of course the most important consideration, and Hong Kong's low tax system will attract more international investors to settle in Hong Kong.
Lu Zhihong, managing partner of Deloitte China Digital Assets Hong Kong, said that Hong Kong's financial market has been developing for many years and has experienced storms such as the Asian financial crisis in 1997 and the financial tsunami in 2008. The supervision of the capital market and financial system has become increasingly perfect. After the virtual asset trading platform licensing system takes effect on June 1, 2023, it will greatly enhance the confidence of global investors in Hong Kong's virtual asset market. With clearer regulatory guidelines, it will bring new opportunities to the brokerage and asset management industries engaged in virtual asset trading, and also provide more protection for retail investors.
In addition, in recent years, the SAR government has introduced various regulatory measures involving anti-money laundering, licensing and prevention of hackers, taking the initiative to assume the responsibility of promoting market standardization and exploring relevant policy formulation options. This shows Hong Kong's determination to develop the virtual asset market.
The industry generally believes that Hong Kong has achieved remarkable results in the virtual asset market in recent years. In addition to having clearer regulatory guidelines to attract a large number of talents and investors, Hong Kong is also very active in developing tokenized securities and stablecoins. For example, last year the HKMA successfully launched 800 million yuan of tokenized green bonds, and at the same time established a stablecoin issuer sandbox, which received enthusiastic support from the industry.
Moreover, with the cooperation of the Hong Kong Stock Exchange and the Securities and Futures Commission, new products are constantly being launched in the market. The first batch of virtual asset spot ETFs were officially listed in April this year. Due to the positive attitude of the SAR government, many institutions also hope to develop in Hong Kong, which also makes talents and investors more confident in Hong Kong's prospects. This is also the biggest achievement of Hong Kong in the development of the virtual asset market in recent years.
Just like the Fintech Week held last year, Coinbase co-founder and CEO Brian Armstrong also participated via video and said that Hong Kong has done a good job in regulating the virtual asset sector. The Hong Kong Securities and Futures Commission and the Hong Kong Monetary Authority provide clear supervision, allowing banks to strengthen cooperation with the virtual asset sector. He also pointed out that the United States needs to make improvements.
Bitkoala learned that OSL Group’s Chief Financial Officer Hu Zhenbang has made it clear that the Hong Kong SAR government’s declaration on virtual assets has indeed strengthened the confidence of the industry. There was a time when some virtual asset-related companies moved from Hong Kong to Singapore for development, but in the past year a large number of these companies have returned to Hong Kong, which shows that there is greater confidence in the future development of Hong Kong’s virtual asset market.
Summarize
Today, the industry generally believes that Hong Kong’s advantages in developing the virtual asset market are becoming increasingly obvious, especially for licensed (and recognized as licensed) trading platforms. Local regulators have made strict requirements in many aspects such as compliance, security, transaction fees, trading varieties, liquidity, user experience, customer service, educational resources and information.
There is no doubt that Hong Kong has built a safe, transparent and competitive virtual asset market, which has effectively attracted global investors and enterprises. Frankly speaking, both virtual asset trading service providers and investors should make good use of Hong Kong's advantages as an international financial center, grasp the trend of technological financial services, make full use of Hong Kong's established sound regulatory system, and explore and develop virtual asset innovation business on this soil that is compatible with regulation, development, tradition and innovation.