Crypto Exchanges& Regulation in Hong Kong

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5 min read
Top exchanges in Hong Kong by Coincub criteria
Article review author
Jonathan Lea
Hong Kong head image

Crypto Country Rating: 6.6/10

8/10
Institutional acceptance
Wide acceptance and ever increasing regulation
7/10
Exchanges & Wallets availability
Leading names with high presence and access
7/10
Government regulation
Taxation rates straightforward and reasonable with no tax for non-professional crypto buyers
5/10
Defi acceptance
No real position taken as yet to DeFi
5/10
Financial services
Growing interest in blockchain
8/10
Transparency
Personal data collection, government tracking, high regulation
5/10
Spending crypto
High number of ATMs but not much to spend on.
8/10
Banks activity in crypto
Recent announcement by leading world bank to form crypto currency brokerage.

Bitcoin and cryptocurrency trading in Hong Kong

Hong Kong gets a 6.6/10 Coincub Crypto Rating. Wide institutional acceptance of cryptocurrencies and low tax on gains is undermined by uncertainty over future legislation and underdeveloped retail opportunities for spending crypto.

Law and crypto trading in Hong Kong

Legal - existing crypto legislation

Hong Kong officially recognizes bitcoin and other cryptocurrencies, describing them as ‘virtual commodities’ or ‘virtual currencies’. However, Hong Kong is currently undergoing regulatory changes relating to the buying and selling of cryptocurrencies by retail investors, so watch out for updates on the latest position. Hong Kong-based exchanges are regulated and need to comply with the Securities and Futures Commission (SFC) regulations. Buying bitcoin with Hong Kong dollars is straightforward and Hong Kong-based exchanges support local payment methods.

Legal - forthcoming crypto legislation

Be aware that the SFC (Securities and Futures Commission) is bringing in a new regulatory regime around crypto exchanges and their offerings to retail traders. If the proposed changes are made law, retail investors will no longer be allowed to buy bitcoin in Hong Kong from cryptocurrency exchanges and other points of sale such as Bitcoin ATMs.

Taxing cryptocurrencies in Hong Kong

Income Tax

If you trade cryptocurrencies professionally you’ll be eligible for income tax on your profits, but if you only trade casually you can avoid tax. However, you’ll have to iron out whether you are trading cryptocurrencies professionally or as an amateur with a specialist advisor. The important thing is whether your profits are derived in Hong Kong (even if the exchanges are overseas). If you’re buying, selling, exchanging bitcoin for gain and based in Hong Kong you’ll need to declare everything. Taxation issues around cryptocurrencies may appear straightforward, but expert advice is advisable as everything crypto is changing all the time. 

Tax relief

Crypto trading is both recognized and tax allowable, so your expenses as a professional incurred in buying or mining crypto – and your losses – can be offset. There is also no capital gains tax on buying and selling crypto – only income tax. Your crypto purchases and sales will make up the revenue figure in a given year from which you will deduct the costs of cryptocurrency purchases. Also, investment costs from previous consecutive years can be added to following returns until they are fully deducted. 

Tax when moving residency

If you are a long-term resident of Hong Kong you are probably deemed a permanent resident for tax purposes. Should you move and become resident, your tax affairs will come under the jurisdiction of your country of residence. 

Tax on mining

Mining is beyond the scope of most individuals and calls for significant investment in time, money and equipment. However, if you are declaring yourself as a miner you are required to pay income tax on your profits, but you may also deduct your expenses, such as electricity, maintenance fees, and the cost of your hardware.

Crypto financial services in Hong Kong

Fin services - retirement planning

Most retirement and pension funds worldwide deem cryptocurrencies too volatile to become part of long-term retirement schemes. There is little certainty on this at present.

Fin services - banking

Global banking giant Standard Chartered Bank has announced that its innovation arm, SC Ventures, will operate a cryptocurrency brokerage and exchange platform in a joint venture between SC Ventures and BC Technology Group (0863.HK), a Hong Kong-based investment company specializing in digital assets. BC Technology operates OSL, the first cryptocurrency exchange to be licensed by Hong Kong’s Securities and Futures Commission.

Fin Services - DeFi

Hong Kong has highly regulated banks and financial services, but there is no real movement in this area.

Using crypto in Hong Kong

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Spend

Hong Kong doesn’t officially recognize cryptocurrency as a payment method. Despite the efforts of a few individual retailers, the city is not the best place to go to live it up with your crypto wealth.

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Gifting crypto

You won’t be able to reduce your tax by gifting your cryptocurrency. Whatever gain you have made on it will be taxable up to the point at which you gift it. 

Crypto regulation in Hong Kong

Security

Using a Hong-Kong based exchange offers a more consistent level of protection in the case of loss, fraud, or hacking, as the Securities and Futures Commission (SFC) regulates them. But, as with any crypto dealings you are considering, it’s always a good idea to check the levels of security, protection, and insurance any exchange can offer you. 

Transparency

As with many government bodies, the Hong Kong tax authorities can request information from crypto exchanges and expect compliance with their laws. You’ll need to provide your personal details and proof of ID – so you can forget about the myth of anonymity that surrounds cryptocurrency. 

Helpful?
FAQ

New to crypto? Here’s our guide!

FAQ Image #1 01 Why Bitcoin? It seems like the buzz around Bitcoin just keeps growing. Bitcoin is a constantly evolving technology with a passionate community. What is it about the digital asset that makes it such a controversial topic and attractive investment?
FAQ Image #2 02 How to Get Started with Bitcoin It can be difficult to get past the technical jargon surrounding bitcoin (BTC) and other cryptocurrencies in order to figure out how you can buy and store them. Beginners can purchase Bitcoin, for example, on many exchanges using fiat currency like U.S. Dollar, Euro or British Pound.
FAQ Image #3 03 Blockchains 101 Blockchains are a type of database where data is stored in blocks that are chained together. As new data comes in, it is entered into a block, which is then chained to the previous block. The Bitcoin blockchain serves as a ledger that records every Bitcoin transaction in history.
FAQ Image #4 04 Bitcoin in the Real World Ok - you’ve found an exchange, bought your Bitcoin, and stored it safely. What’s next? By now you can buy just about anything with Bitcoin if you try hard enough, from Amazon gift cards to an old master painting. You can also convert your BTC to fiat with ATMs, an exchange, and more.