Hong Kong launches international crypto reporting framework to tackle tax evasion

Hong Kong authorities have initiated a public consultation on implementing the OECD's Crypto-Asset Reporting Framework (CARF), marking a significant step toward greater transparency in digital asset transactions as the city positions itself as a global crypto hub. The move aims to strengthen international tax cooperation and combat cross-border tax evasion through automatic information exchange with partner jurisdictions beginning in 2028.

Background and Context

The consultation reflects Hong Kong's broader strategy to align with global standards while developing its digital asset ecosystem. The OECD's CARF, approved in 2022, establishes a global standard for collecting and exchanging information on crypto-asset transactions between tax authorities. Hong Kong's adoption comes amid growing international pressure to close loopholes that have allowed digital assets to circumvent traditional financial oversight mechanisms. The consultation also addresses amendments to the existing Common Reporting Standard, which has been the cornerstone of global tax transparency since 2014.

Key Figures and Entities

Christopher Hui, Hong Kong's Secretary for Financial Services and the Treasury, announced the consultation, emphasizing the framework's importance for maintaining the city's status as an international financial centre. According to the official government statement, Hui stressed that implementing CARF and CRS amendments demonstrates Hong Kong's commitment to international tax cooperation. The Financial Services and the Treasury Bureau (FSTB) is leading the legislative process, working alongside the Inland Revenue Department to ensure compliance with OECD standards while safeguarding data confidentiality and security.

Legal and Financial Mechanisms

The proposed amendments to Hong Kong's Inland Revenue Ordinance would establish mandatory reporting requirements for crypto-asset service providers, including exchanges and wallet operators. The framework requires detailed collection of transaction data, including user identities, transaction amounts, and timestamps. The consultation paper outlines that Hong Kong will implement automatic exchange on a reciprocal basis, sharing information only with jurisdictions that meet the OECD's data protection standards. According to the timeline, crypto-asset transaction information would be exchanged starting from 2028, while amended CRS provisions would take effect in 2029.

International Implications and Policy Response

Hong Kong's adoption of CARF signals the growing global consensus on crypto asset regulation and tax transparency. The move places the city alongside over 100 jurisdictions committed to the framework, addressing long-standing concerns about digital assets being used for tax evasion and money laundering. The reciprocal nature of the information exchange system ensures Hong Kong receives equivalent data from partner jurisdictions, strengthening its ability to monitor outbound crypto transactions. The consultation period, open until February 6, allows stakeholders to influence how these international standards will be adapted to Hong Kong's unique regulatory environment while maintaining the city's competitive position in the global digital asset market.

Sources

This report draws on the Hong Kong government announcement, OECD documentation on the Crypto-Asset Reporting Framework, and the Inland Revenue Ordinance of Hong Kong.