Hong Kong Unveils AI Guidelines For Finance and Crypto Tax Breaks

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Key Takeaways

  • Hong Kong introduces its first policy framework for AI in finance, alongside potential tax incentives for virtual assets.
  • The Securities and Futures Commission (SFC) is set to issue full licenses to crypto exchanges by year-end.
  • Hong Kong’s policies aim to attract investors and reaffirm its key financial hub position.

Hong Kong has announced new guidelines focused on AI usage in the financial sector and has proposed tax breaks on cryptocurrency holdings.

Currently the world’s third-ranked global financial center, this new initiative underscores Hong Kong’s drive to become Asia’s premier business and technology center.

Overview of Hong Kong’s AI Policy, Tax Initiatives, and Crypto Licensing Framework

During Hong Kong’s annual Fintech Week, Financial Services Secretary Christopher Hui explained that the city is primed to leverage AI in financial markets due to its vast financial landscape.

He stated that this dual-track regulatory approach will allow sector-specific agencies to address AI risks and opportunities with tailored regulations.

For the cryptocurrency sector, Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), aims to finalize a list of licensed crypto exchanges by the end of 2024.

Complementing this initiative, Hong Kong Exchanges and Clearing Limited plans to introduce a Virtual Asset Index Series on November 15, providing benchmarks for Bitcoin and Ether pricing across the Asia-Pacific time zone. Furthermore, the government has proposed tax incentives for cryptocurrency investment in the region.

Currently, Hong Kong does not levy capital gain taxes on profits from a cryptocurrency transaction. Unlike countries like Germany and Japan, crypto taxes could rise as high as 45%.

However, frequent trading profits are subjected to income tax in Hong Kong, which can reach up to 17%. Executive Director Eric Yip mentioned that a consultation panel would be set up in 2025 to support licensed exchanges and foster ongoing collaboration.