Country overview

Hong Kong is traditionally considered a special economic zone in China. After the Chinese government initiated the crypto ban, Hong Kong played a role as a crypto hub between mainland China and the rest of the world. Crypto operations inside Hong Kong are legal, and it has an excellent legal framework for crypto.

Hong Kong is a safe place with low crime and violence levels. The jurisdiction has 78.3 points (from 100) for safety level in Numbeo crime rating (1). Homicide level (2) is 0,3 per 100,000 inhabitants a year. Level of firearm-related death (3) 0.03 per 100,000 inhabitants a year - one of the lowest in the world.

Crypto payments in Hong Kong are legal according to the local tax authority guide (4): “The person may accept cryptocurrency as payment from customers or use it for purchasing goods.” In March 2022, the mobile arm of Hutchison Telecommunications announced (5) “an industry-first collaboration that will enable Hong Kong customers to pay for phone bills, products, and services online with selected cryptocurrencies.” According to the Standard survey (6), 18% of HK citizens use crypto for transfers/payments. 88% of local crypto users are interested in crypto cards.

According to the local tax authority guide (7), paying a salary in crypto is legal in Hong Kong: “employees, particularly those working in digital asset related sector, may receive remuneration (e.g. salary) in cryptocurrency. The same salaries tax treatment would apply to such income from employment even though it is paid in cryptocurrency. The amount to be reported as the employee’s employment income should be the market value of the cryptocurrency at the time of accrual."

Cryptocurrencies are legal (as Virtual Assets or VA) and have been regulated in HK since 2018. Some assumptions about regulation in 2022 may be found in the joint ordinance (8) of the Hong Kong Monetary Authority (HKMA) and Securities and Futures Commission (SFC). The main priority for regulators is investors’ protection. According to the ordinance, “most VA trading platforms in Hong Kong and overseas are unregulated or regulated only for AML/CFT purposes.”

DifiGroup’s interpretation (9) of the ordinance is that “any institutions doing VA business must engage a partner based in Hong Kong.”

In October 2022, the SFC authorized a regulatory regime (10) for digital asset futures ETFs. This factor has sped up the local crypto market, and SFC licensed brokers (11) have started to provide crypto-related services.

Also, in December 2022, the legislative assembly published the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLCTFO). According to Lexology (12), this bill made the SFC the primary crypto regulator in the country. The full text of AMLCTFO is available here (13). 

From 1 June 2023, new crypto regulation rules were implemented in Hong Kong. According to it, crypto entities must get an SFC license or stop operations. The SFC already provided a warning (14) for local companies in August. Some information about new regulations may be found in the New Regulations Consultation Paper (15).

New regulations defend investors’ interests and require licensed companies to have a significant capital and strict accounting/AML policy. According to insiders (16), HK’s license costs between $12,000,000 and $20,000,000. 

In August 2024, only the same two companies got the license, which had it before in the SFC sandbox regime - Hash Key and OSL. Also there are 16 entities, which still waiting for regulator's approval such as DFX Labs and Crypto.com. Unfortunately some companies have rejected from the license or their applications were declined by SFC, such as Gate, HTX, OKX and Bybit. In October 2024, one more company - Hong Kong Virtual Asset Exchange Limited (17) got the third license and still 14 applications are in progress.

One more important update that makes Hong Kong a global leader in crypto regulation is the approval of crypto ETFs. This jurisdiction was the second in the world to approve Bitcoin ETFs after the U.S. in April 2024 (18). 

 The Hong Kong Inland Revenue Department (IRD) provided its interpretation of cryptocurrency taxation in March 2020 in Departmental Interpretation and Practice Notes No. 39 (“DIPN 39”) (19). You may see standard tax rates applied for VA income below.

1) Numbeo crime rating. Statistics

2) Homicide level. The list of countries by UNODC homicide rate.

3) Firearm-related death. Historical list of countries by firearm-related death rate.

4) PROFITS TAX DIGITAL ECONOMY, ELECTRONIC COMMERCE AND DIGITAL ASSETS.

5) “3” becomes Hong Kong’s first telecoms operator to accept cryptocurrency payments. Providing customers with a new spending platform in the Metaverse. PDF-file

6) Crypto is gaining ground as a mode of payment in Hong Kong. Article

7) PROFITS TAX DIGITAL ECONOMY, ELECTRONIC COMMERCE AND DIGITAL ASSETS.

8) Joint circular on intermediaries’ virtual asset-related activities. PDF-file

8) Hong Kong gives bank brokers the crypto go-ahead. Article

9) Hong Kong brokers await SFC approval before new virtual asset trading legislation. Article

10) Hong Kong financial regulator issues guidelines for crypto futures ETFs. Article

11) What are virtual assets in Hong Kong, and what do the city’s new rules mean for crypto trading? Article

12) Lexology Passage of Anti-Money Laundering and Counter-Terrorist Financing (Amendment) Bill 2022

13) Warning: Virtual asset trading platforms engaging in improper practices. Article

14) Elegislation HK's AMLCFTO

15) Consultation Paper on the Proposed Regulatory Requirements for Virtual Asset Trading Platform Operators Licensed by the Securities and Futures Commission

16) Hong Kong's New Crypto License Could Cost Exchanges a Pretty Penny.

17) Lists of virtual asset trading platforms

18) Elliptic. Crypto regulatory affairs: Hong Kong regulator approves Bitcoin and Ether ETFs

18) HK Taxation of E-Commerce and Digital Assets (DIPN 39)

19) Fastlane Global Guide about salaries taxation in HK

20) Tokentax Crypto Tax-Free Countries for 2023

21) PWC Tax Summaries - Taxes on corporate income

Last update: October 2024