Currently, retail investors are allowed to purchase and trade cryptocurrency in Hong Kong.

However, cryptocurrency is considered a virtual commodity and not legal tender. 

Because of this label, there is still a lot of grey area when it comes to the crypto market in Hong Kong.

Despite this, the comprehensive rules that have governed cryptocurrency in the area are beginning to change. 

Currently, these are the rules and regulations regarding the use of cryptocurrency in Hong Kong. 

• No Capital Gains Tax on cryptocurrency
• Mining regulations will revolve around the data centers they’re mined in
• When it comes to transactions for crypto-exchanges, the SFC (Securities and Futures Commission) 
• AML (Anti-Money Laundering) and CFT (Counter-Financing of Terrorism) laws apply to every person and business in Hong Kong, regardless of the activity

Can I Legally Buy Crypto in Hong Kong?

In Hong Kong, crypto-enthusiasts and investors can purchase cryptocurrency through crypto-ATMs, exchange platforms, and individual holders.

However, things may not be this way for much longer. 

The SFC is ushering in a new authority around crypto exchanges and their availability to retail traders.

If this change takes place, retail crypto traders will be unable to purchase their favorite digital currencies on exchanges or through crypto-ATMs.

Do I Have to Pay Taxes on Crypto in Hong Kong?

In many places, in regards to profits on trades and investments, countries have what’s called a Capital Gains Tax.

This tax makes it mandatory for investors to pay taxes on financial investments they sell if they net a profit.

However, there is no Capital Gains Tax in Hong Kong. 

However, individuals who trade frequently are still subject to tax payments.

If an individual or business profits from crypto-trading on a regular basis in Hong Kong, this is considered income. 

Income tax in Hong Kong can be as high as 17%.

The Inland Revenue Department of Hong Kong (IRD) is tasked with collecting taxes from cryptocurrency in the area. 

Regulations for Cryptocurrency Exchanges

If the new regime takes over in February, big changes are on the horizon for Hong Kong cryptocurrency exchanges.

Any exchange operating in Hong Kong must apply for a special license with the SFC. 

In an unprecedented rule change, exchanges will only accept accredited professional investors with more than 8 million HKD as investors.

Before this proposed rule change, only exchanges that sold Security Tokens had to apply for a special license. 

Cryptocurrency AML/CFT Laws, Rules, and Regulations

There are strict sets of rules that exist around cryptocurrency when it comes to anti-money laundering and funding terrorism in Hong Kong.

Hong Kong is a FATF (Financial Action Task Force) member and follows the world’s watchdog compliance recommendations regarding cryptocurrency. 

Under AML/CFT regulations, all individuals and businesses are obligated to report any suspicious or illegal activities to proper authorities in conjunction with FATF recommendations.

Activities such as drug trafficking, organized crime, and crimes pertaining to the United Nations Ordinance are taken very seriously. 

Cryptocurrency exchanges and any other entity that passes funds through Hong Kong’s jurisdiction hold a legal responsibility to report these activities to AML/CFT authorities.

Failure to submit SARs (Suspicious Activity Reports) can result in a three-month jail sentence and a fine of over 50,000 HKD. 

Rules and Regulations for Mining Crypto in Hong Kong

When cryptocurrency is mined, new blocks are created on the blockchain.

This process also includes verifying various transactions and collecting “block-rewards” of cryptocurrencies.

These block rewards are what make crypto-mining a profitable activity. 

Land in Hong Kong is extremely limited, and there are several land-use rights regarding running data centers.

Unless the operation is very small-scale, anyone interested in running a cryptocurrency mining operation should keep these rules and regulations in mind. 

• The building involved in the operation must comply with the Buildings Energy Efficiency Ordinance. 
• These data centers will be monitored and supervised by the Office of the Government Chief Information Officer. 

Reporting Requirements for Crypto in Hong Kong

One of the most positive aspects of cryptocurrency regulations in Hong Kong is that transactions of certain amounts don’t have to be reported.

Regardless of the size of the transaction, there is no requirement to report to any governing body or authority. 

However, profits generated through cryptocurrency trading and sales are subject to income tax laws and regulations.

Declarations in tax returns are mandatory in Hong Kong and can be subject to up to 17% taxation.

It’s not quite a dystopian society yet for Cryptominers, but it’s clear the government in Hong Kong is bringing in Crypto under tighter constraints.

Takeaways

With Hong Kong’s government and other regulatory bodies embracing the promotion of fintech and other cutting-edge financial technology, one would assume the future looks bright for cryptocurrency in the region.

However, there are uncertainties because of the new restrictions and laws looming for Hong Kong in February. 

For a country seeking to push the benefits and commodities of cryptocurrency, it almost seems like Hong Kong’s strategies will prove to be counterproductive.

While the government does seem proactive in its attempts to promote the positives in fintech and crypto, placing such strict regulations on digital currencies could make it difficult for the majority of citizens to take advantage of their use. 

For the time being, citizens of Hong Kong are still able to enjoy the use of cryptocurrency freely.

If the proposed changes take effect, they won’t do so until February of 2022.

Only time will tell if the Hong Kong government’s attitude and approach towards cryptocurrency will pay off or have a damaging effect because of the restrictiveness.

Are you a business that’s looking to deal with cryptocurrency?

In Hong Kong, you’ll need a license to do just that.

Open your business in Hong Kong with Air Corporate and we’ll help you get the right licenses for your business.

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Cryptocurrency is a digital currency secured by cryptography which makes it almost impossible to counterfeit.

They are decentralized networks based on blockchain technology which is a distributed ledger enforced by a separate network of computers.

What sets cryptocurrency apart from the traditional currency is that it is virtual and that it is not issued by any government authority.

Of course, we have heard that this is a decentralized currency in terms of its issuance, but trading of crypto is still traditionally done so on exchanges just like Forex or stock market exchanges.

Also, we recommend reading up on the legality of Crypto in Hong Kong, as things begin to get a little dystopian for Crypto traders around the world.

Top Hong Kong Crypto Exchanges

1. Bitmex
2. Coinmama
3. CEX.io
4. Paybis
5. BTCC
6. OKCoin
7. Huobi
8. Wirex
9. Crypto.com
10. Binance

What are crypto exchanges?

A crypto exchange is a virtual marketplace where cryptocurrency can be bought or sold.

This online platform functions as an intermediary for cryptocurrency buyers and sellers.

Here, you can deposit money via bank transfer, wire, or any other authorized means of deposit.

However, this service has a price attached to it and you will often have to pay for it.

1. Bitmex

Bitmex is a peer-to-peer cryptocurrency trading platform created in 2014 that is registered in Seychelles but operates in Hong Kong and the US.

Bitmex is particularly focused on cryptocurrency derivatives trading which includes margin and futures trading.

Due to this focus, Bitmex is better suited for experienced traders instead of beginners who wish to trade with lower volumes of cryptocurrency

Some of the benefits of trading with Bitmex are its increased security levels and reduced red tape with no identity documents requested.

The trading fee is also quite low along with there being no deposit or withdrawal fee either.

Currencies Supported

2. Coinmama

Coinmama is an online crypto exchange based in Slovakia.

Since launching in 2013, Coinmama has amassed a total of 2,300,000 users across 197 countries.

Payments can be made on Coinmama through Apple Pay, SEPA, SWIFT, Fedwire, and Faster Payments.

The different cryptocurrencies supported on this platform include Bitcoin, Cardano, EOS, Bitcoin Cash, Etherum, Ethereum Classic, Qtum, Tezos, and Litecoin.

What makes Coinmama unique is that it has one of the highest daily spending limits compared to all other crypto exchanges.

Other attractive features include instant cryptocurrency delivery upon payment, multiple payment options, and its rewarding affiliate program.

Supported Cryptocurrencies

3. CEX.io

CEX.IO first began as a cloud mining services provider and has now expanded into a multi-functional cryptocurrency exchange platform.

Through CEX.IO, you can also buy and sell cryptocurrencies on a web trading portal or a mobile application.

What makes CEX.IO unique is that you can hold several different account types enabling traders to choose which cryptocurrency best matches them.

The platform is available for use in more than 220 countries.

However, due to certain regulations, traders based in the US are not accepted onto the platform.

Currently, CEX.IO supports DASH, Bitcoin Gold, Bitcoin Cash, ETH, ZEC, and BTC along with a number of fiat currencies.

The platform has a number of security features that protect users and eliminates any fear of hacking and theft.

These measures include two-factor authentication, encrypted data, cold storage for cryptocurrency funds, and internal AML/KYC policy and procedures.

Supported Cryptocurrencies

4. Paybis

Paybis is a multi-cryptocurrency exchange that provides multiple services which include the buying and selling of cryptocurrencies and also providing liquidity services within the fintech sector.

Currently, Paybis supports 47 different fiat currencies and 10 different cryptocurrencies that include Binance Coin, Ethereum, Litecoin, Ripple’s XRP, Stellar, Tron, Bitcoin, Bitcoin Cash, and USD Tether.

Due to its significant global reach and international customer base, the platform is also available in 9 languages, making it extremely accessible and easy to use.

The benefits of using Paybis are that it has excellent customer ratings as it is KYC and AML compliant and is regulated by financial authorities in the UK, EU, and the U.S.

Additionally, Paybis is known to have a transparent fee structure with no hidden fees, extremely responsive customer support services, and a simple registration process.

Supported Cryptocurrencies

5. BTCC

BTCC is a UK-based platform that was established in 2011.

BTCC offers multiple services which include fiat/crypto exchange, bitcoin mining services, and bitcoin wallet provision.

You can also access the services BTCC offers through a web-based platform and a mobile trading platform which gives you the choice to decide what to use depending on your preference, usage, and technological familiarity.

Moreover, to make the platform secure, there is two-factor authentication due to the unlimited crypto deposits offered without KYC.

There is also a mining pool for traders to mine their own coins for a rental fee.

Supported Cryptocurrencies

6. OKCoin

OkCoin is one of the biggest crypto exchanges in the world by volume.

The platform is based in Beijing and was founded in 2013.

While the platform accepts traders from all over the world, OkCoin is primarily suited for users in China and the rest of the Asian market.

Despite not being regulated by a financial regulatory authority, the platform has built a strong reputation amongst users by gaining their confidence and trust.

OkCoin is embedded with the latest security and encryption protocols to ensure every trade is safe and secure.

Moreover, the fees are low compared to other platforms and users can also trade on margin and in futures markets.

While fiat currency deposits and withdrawals can be made, verification is required and only a limited number of cryptocurrencies are available to trade with.

Supported Cryptocurrencies

7. Huobi

Huobi is a self-proclaimed digital asset exchange as opposed to a crypto exchange.

Originally based in Beijing, Huobi had to move to Singapore as fiat to cryptocurrency trading was banned in China.

Huobi also has offices in Hong Kong, the USA, and South Korea. 

The platform is popular due to it being extremely technologically advanced with its price feeds, charting, cryptocurrency profiles, and in-depth market data.

Users have described the platform as a perfect balance between functionality for experienced traders and accessibility for new traders.

Huobi also has over 100 cryptocurrencies on its main exchange.

What makes Huobi unique from other exchange platforms is its ‘Smartchain’ research and analysis feature which provides insight into different blockchain assets.

The only negative side is that as of now, the registration process for users outside of China, Hong Kong, and Singapore is slightly more complicated.

Supported Cryptocurrencies

8. Wirex

Wirex is an innovative app that allows digital and traditional currencies to be easily sent, received, and exchanged.

You can make payments through the Wirex App, their payment card, and e-wallet which transactions for digital and traditional currencies.

Currently, Wirex supports 16 fiat currencies and 9 different cryptocurrencies which include Bitcoin, Dai, Ethereum, Nano, Stellar’s Lumen, Waves, Litecoin, and Wirex Token. 

The benefits of using Wirex as a crypto exchange are that the registration and verification process is extremely quick and easy and can be done in just a couple of minutes.

Unlike some crypto exchanges, Wirex supports both cryptocurrency and fiat money which is a huge bonus for people who use both who want to make their transactions all in one place.

Lastly, it is an easy-to-use platform that is regulated and licensed with a global reach of 130 countries.

Supported Cryptocurrencies

9. Crypto.com

Crypto.com is a crypto exchange that supports the buying and selling of over 70 cryptocurrencies.

Launched in 2016 and based in Hong Kong, the platform provides users access to the most popular cryptos in the industry which include Bitcoin, Cardano, Ethereum Bitcoin Cash, Ripple, Stellar, Litecoin, Tether, and USD Coin.

Moreover, you can also trade in lesser-known cryptocurrencies such as COSMOS, Enjin Coin, and VeChain if you are looking to invest.

The platform is extremely user-friendly and is insured for $350m which protects customers from physical damage or any third-party theft.

Moreover, the platform places huge importance on security and ensuring that all trades are carried out safely.

Supported Cryptocurrencies

10. Binance

Binance is known as one of the fastest platforms to trade cryptocurrencies in the market and is also one of the largest crypto exchanges in terms of the trading volume.

The platform is quite popular both for investors and traders as access is provided to over 30 cryptocurrencies.

Not only does this give investors flexibility but it makes it easier to enter the market.

All investors and traders can make payments through bank deposits, credit or debit cards, bank transfers, or third-party payments via Banxa and Simplex. 

There is also 24/7 customer support available along with a Learn Centre for new traders.

A popular aspect of Binance is their Affiliate Program where for every new user referred to the platform, the referrer will earn a commission anytime the new user trades on Binance.

Supported Cryptocurrencies

Final words

Cryptocurrency and digital assets are becoming extremely popular which are why you need to stay ahead of the game and understand which crypto exchange is the best for you!

Are you looking to get your business involved with cryptocurrencies in Hong Kong?

It’s important to be aware of all the licensing and registration requirements that you need to deal in crypto as a business in Hong Kong.

To make sure you can navigate these MSO licenses you need, it’s important to make sure you have a company secretary who can walk you through them.

Register your business or change your company secretary to Air Corporate, and we’ll help you get all the licensing and registration you need to deal with crypto at your business.

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