Hong Kong announces crypto tax breaks, AI policies to boost finance sector

Hong Kong has ramped up its efforts around cryptocurrencies and AI in a bid to modernise and strengthen its financial services sector.

Hong Kong’s Financial Services and Treasury Bureau (FSTB) plans to propose legislation by the end of this year extending tax breaks to include digital asset investments such as cryptocurrencies. 

According to a Bloomberg report, the proposal, to be introduced as legislation by the year’s end, aims to extend existing tax breaks for private funds and family offices to include investments in virtual assets.

Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, explained that this move is part of a larger strategy to enhance Hong Kong’s position as a hub for managing and allocating diverse types of financial assets, including cryptocurrencies.

AI in finance

On the artificial intelligence (AI) front, Hong Kong is also introducing new policies to facilitate the responsible use of AI in financial services. 

In an October 28 release, the FSTB outlined a “dual-track approach”, focusing on promoting AI adoption while managing associated risks.

These policies aim to enhance operational efficiency, improve customer service, and ensure the secure use of AI technologies in the financial sector.

This emphasis on AI comes as geopolitical tensions rise between the US and China, leading companies like OpenAI and Google’s Gemini to limit their services in Hong Kong.

To reduce dependence on these foreign technologies, Hong Kong is now focusing on developing and integrating its own AI solutions.

Hui pointed out that Hong Kong’s “sizable markets and rich scenarios” offer an ideal environment for AI integration.

The Hong Kong government plans to work closely with financial regulators and service providers to develop responsible AI integration strategies.

This includes setting up a supervisory framework to manage risks like job losses and intellectual property issues associated with AI adoption.

As previously reported by Invezz, Hong Kong’s Securities and Futures Commission (SFC) has been consulting industry stakeholders to shape its AI guidelines.

The SFC is expected to release a comprehensive circular in November outlining the regulations, standards, and potential risks linked to AI integration in the financial sector.

A focus on the crypto markets

Among other developments, the Hong Kong Exchanges and Clearing Limited (HKEX) has announced plans to launch a Virtual Asset Index Series on November 15, which according to the organisation’s Chief Executive Officer Bonnie Y. Chan will deliver “transparent and reliable real-time benchmarks,” for Bitcoin and Ether.

The move comes as a part of the jurisdiction’s efforts to solidify its role as a global crypto hub.

Further bolstering these efforts is the SFC’s recent commitment to licensing more crypto exchanges by the end of 2024.

Currently, there are two licensed exchanges that cater to both retail and institutional investors. 

However, on October 28, during Hong Kong FinTech Week, Eric Yip, the SFC’s Executive Director for Intermediaries, confirmed that a final list of fully licensed crypto exchanges will be released by year-end. 

He also mentioned that a consultation panel will be set up by early 2025 to ensure proper cooperation between these licensed platforms.

As these measures unfold, Hong Kong is positioning itself to attract both local and international investors, strengthening its competitiveness against other crypto hubs like Dubai.

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