Hong Kong forces crypto providers to track customer trades

Hong Kong's Legislative Council passed a crypto tax-information reporting bill on Nov. 4, requiring covered providers to begin collecting information in 2027 before the Inland Revenue Department starts exchanging it with partner jurisdictions in 2028.

The department's implementation background specifies Jan. 1, 2027, for the Crypto-Asset Reporting Framework (CARF). Providers collect and report information to the tax authority, and the department conducts the international exchanges.

The first collection year comes before the cross-border sharing date for covered firms.

CARF establishes due diligence and annual reporting requirements for crypto-asset service providers. It concerns tax transparency, with providers gathering information that tax authorities can use, rather than setting an individual user's tax bill.

The bill also implements the amended Common Reporting Standard (CRS) for financial account information. The government says that the revised standard takes effect in 2028, with exchanges starting in 2029. Its schedule is separate from CARF's 2027 collection and 2028 exchange timetable.

In December 2024, Hong Kong intended to complete legislative amendments by 2026 and begin crypto-information exchanges in 2028. The Nov. 4 vote marks the legislative milestone ahead of the collection year.

Provider scope and next steps

In its CARF explanation, the Inland Revenue Department describes reporting providers as businesses carrying out customer exchanges between crypto-assets and fiat currencies, or between crypto-assets.

These include businesses acting as counterparties or intermediaries and those operating trading platforms. Obligations depend on the provider's connection to a jurisdiction under the framework's nexus rules.

The department describes reportable users, and relevant controlling persons of entity users, by tax residence in reportable jurisdictions. A provider must identify the relevant users or controlling persons before it can prepare information for the annual reporting process described by the department.

Its explanation lists identifying details, tax-residence information, and aggregated transaction information among the required data. That scope is key when assessing a provider's obligations and which customers' information is reportable.

Hong Kong says exchanges will be reciprocal and subject to confidentiality and security safeguards. The Inland Revenue Department will issue guidance and has established a dedicated team to provide technical support and answer industry inquiries.

The department also says it will develop a CARF reporting portal and publish the data schema that defines the reporting format, with further details to follow. Those materials will set out more of the reporting process for providers preparing to collect the required data in 2027.