Digital Assets

Licensing of OTC virtual asset dealers and licensing of virtual asset custodians in Hong Kong are two new regimes that the Government has committed to introducing into the Legislative Council in a dedicated bill before the end of 2026, as amendments to the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615). The defining feature of both regimes, stated expressly in the consultation conclusions of 24 December 2025, is the absence of a transitional period: there will be neither a “deeming arrangement” (a provisional licence while an application is being considered) nor a non-contravention period of the kind trading platforms enjoyed in 2023–2024. The regimes will commence on a date fixed by the Government, and from that date anyone who carries on a business of buying and selling virtual assets for clients, or of safekeeping their private keys, without an SFC licence must stop operating. The entry threshold is already known: paid-up share capital of HK$5,000,000 for a dealer and HK$10,000,000 for a custodian, plus liquid capital (up to HK$3,000,000 for a dealer and HK$3,000,000 for a custodian), at least two responsible officers, a Hong Kong company or a registered branch of a foreign company, and custody of client assets only with an SFC-licensed custodian.

Hong Kong has no separate crypto tax and no digital-asset provisions in the Inland Revenue Ordinance. Profits from digital assets fall within profits tax under the ordinary machinery of section 14 of Cap. 112 where they are trading profits with a Hong Kong source; capital gains are not taxed at all. The only Inland Revenue Department guidance on the substance is DIPN 39 (Revised) of March 2020, which has not been updated since. The practical consequence is that everything turns on the line between trading stock and a capital asset, and that line is drawn by the intention at acquisition and by nine questions set out by the Court of Final Appeal.