Hong Kong has launched a consultation on the Crypto-Asset Reporting Framework (CARF), signaling the city’s intent to integrate crypto-asset reporting into its tax compliance regime. The consultation follows a December 13, 2024 commitment to the Global Forum and sets a timeline for legislative amendments by 2026 and the start of automatic information exchange in 2028, underscoring alignment with OECD standards to strengthen transparency and deter tax evasion in digital-asset markets.
CARF scope, tax treatment and compliance implications
The Crypto-Asset Reporting Framework (CARF) is an OECD-designed standard mandating automatic cross-border exchange of tax-relevant crypto-asset information. It targets a broad range of instruments including major cryptocurrencies, fiat-referenced stablecoins, crypto-asset derivatives and certain non-fungible tokens with payment or investment characteristics, with Hong Kong’s consultation seeking feedback on Inland Revenue Ordinance amendments and CRS updates to subject digital-asset flows to the same reporting discipline as traditional finance.
Under Hong Kong’s existing fiscal regime, trading income from cryptocurrency and token operations is treated as taxable profits at a corporate rate of 16.5%, while capital gains remain untaxed. The city retains substantial criminal and civil penalties for tax evasion, including imprisonment of up to three years, fines of HK$50,000 per offence and potential additional levies up to three times the evaded tax. Concurrent regulatory work includes a licensing regime for fiat-referenced stablecoin issuers due to take effect on August 1, 2025, requiring a minimum paid-up share capital of HK$25 million, operating alongside the CARF-driven reporting changes.
The consultation documents acknowledge practical challenges in translating CARF into enforceable domestic rules, noting that DeFi platforms and DAOs complicate the identification of reporting entities because they may lack a single legal personality or centralised operator. Implementing CARF will require legislative and supervisory clarifications on which entities bear reporting duties and how intermediaries, custodians and VASPs must collect and retain counterparty and transaction-level data.
Record-keeping, beneficial owner identification and alignment with AML obligations will be focal points for compliance teams. For VASPs, custodians and token issuers, the expected effect is an expansion of operational compliance burdens encompassing enhanced KYC, systematic transaction reporting and process audits to ensure data accuracy for automatic exchange.
For institutional investors, the transparency CARF seeks to create may reduce jurisdictional risk and encourage participation by parties that require robust reporting frameworks. At the same time, the industry must address increased operational costs and potential frictions arising from data collection across decentralized architectures.
Hong Kong’s CARF consultation frames a pathway from public feedback to statutory change. Legislative amendments are targeted for completion by 2026, with automatic exchange of crypto-asset information planned for 2028, defining a clear runway for integrating digital assets into global tax transparency regimes.