Hong Kong is stepping up its game to become a leading offshore finance hub by proposing tax exemptions for hedge funds, private equity funds, and ultra-wealthy investors, as the city is trying to attract more global capital, especially in the booming crypto market.
The tax exemption proposal
Per Financial Times, Hong Kong’s government outlined a 20-page proposal that wants to exempt profits from cryptocurrencies, private credit, and other investments from taxes.
This initiative is part of a wider strategy to create a more inviting, more friendly environment for asset managers who are choosing where to set up shop.
In addition to crypto, the government plans to extend these tax breaks to private credit, overseas property, and carbon credits.
They’ve even launched a six-week consultation period to gather feedback on this proposal.
The Sovereign Individual thesis
Hong Kong has been actively positioning itself as a hub for crypto operations, and it already introduced regulations that allow both retail and institutional investors to trade digital currencies, hoping to attract crypto companies and talent.
The city licensed exchanges like Hashkey and OSL, showing its commitment to integrating crypto into its financial system.
Just this week, ZA Bank became Asia’s first bank to offer retail customers direct cryptocurrency trading, but the Securities and Futures Commission plans to speed up the licensing process for Virtual Asset Trading Platform applicants who already have provisional status.
Competing with Singapore
As Hong Kong and Singapore vie for dominance as Asia’s top offshore financial center, this rivalry is driving fast, or let me say this unprecedented financial advancements in both locations.
Each city leverages its strategic position, robust legal frameworks, and investor-friendly policies to attract global capital.
Despite political challenges, Hong Kong boosted its appeal by simplifying family office regulations and offering tax breaks, and it’s also promoting itself as a hub for asset management, private equity, and emerging sectors like Web3 and crypto.
On the other hand, Singapore isn’t sitting idle either, because it’s been attracting high-net-worth individuals with its Variable Capital Company framework that offers flexible fund structures.
Plus, Singapore avoids imposing capital gains tax, making it particularly attractive for investment funds looking for growth.
