Letters | Hong Kong needs a clearly defined and well communicated cryptocurrency tax regime

Readers discuss the challenges governments face in bringing cryptocurrency gains into the tax net, the financial costs of junk calls, a scheme to attract talent to the city, and the use of the Fanling golf course

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A woman passes a cryptocurrency exchange office in Hong Kong on May 27. Photo: AFP

Published: 11:30am, 9 Oct 2023

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According to a recent study by foreign exchange education platform Forex Suggest, Hong Kong is the most cryptocurrency-ready jurisdiction in the world because of its long history as a regional centre of trade and commerce, its favourable tax regime, the large number of cryptocurrency ATMs and businesses operating in the blockchain and related industries in the city.

Hong Kong has no capital gains tax, and only frequent cryptocurrency trading is treated as income, which is then subject to profits tax, capped at 16.5 per cent.

Around the world, billions of dollars in income go unreported annually in digital asset trading. In the US, which imposes capital gains tax on the sale of cryptocurrency and income tax on cryptocurrency mining, the standard tax form now asks whether the individual has engaged in virtual currency transactions.

The European Union passed legislation in April that will require the tracing of cryptocurrency transactions. India has a 30 per cent tax on cryptocurrency profits and also requires exchanges to deduct a 1 per cent tax on transactions above a certain amount and pay that tax to the central government.

It is clear that cryptocurrency’s adoption into the tax system has been hindered by several challenges. One issue is the anonymous nature of cryptocurrency transactions, which complicates government tracking and regulation. Furthermore, the diversity and constant evolution of cryptocurrencies make it challenging for governments to stay abreast of all developments.