Lede
The Hong Kong Securities & Futures Professionals Association (HKSFPA) has officially urged the city’s government to modify its planned implementation of the Organisation for Economic Co-operation and Development’s (OECD) crypto reporting standards. While the industry body broadly supports the general direction of the proposed changes, it has expressed concerns regarding the specific burdens these rules may place on local institutions. The organization highlighted that the implementation of the OECD’s Crypto Asset Reporting Framework (CARF) and the related Common Reporting Standard (CRS) amendments could expose financial entities to significant operational and liability risks. This call for a softer approach is intended to protect the local industry while still adhering to the global push for increased tax transparency in the digital asset sector.
The HKSFPA’s position reflects a balance between regulatory alignment and the practical needs of the local market. The association confirmed its support for mandatory registration of crypto service providers and the expansion of transaction reporting requirements. However, it cautioned that the current proposal includes elements that might be too stringent for certain market participants. By advocating for a softening of these standards, the HKSFPA aims to ensure that Hong Kong remains a competitive financial hub. The group warned that without adjustments, the framework might saddle local institutions with excessive liabilities that could discourage innovation and investment within the city’s growing crypto ecosystem.
As Hong Kong prepares for these changes, the HKSFPA is specifically focusing on the potential for uncapped per-account penalties and the threat of personal liability for company directors. These factors, according to the group, could raise compliance risks to unsustainable levels. Consequently, the association has urged the government to introduce clear penalty caps and provide safeguards for companies that are acting in good faith. This advocacy comes at a critical time as the city seeks to establish a robust regulatory framework for the digital asset sector while managing its international commitments as a major financial center.
Context
The Crypto Asset Reporting Framework (CARF) represents a new international standard designed for the automatic exchange of tax information specifically for crypto asset users across borders. In contrast, the Common Reporting Standard (CRS) is the OECD’s existing regime for the automatic exchange of information regarding traditional financial accounts. The integration of these two frameworks is part of a global effort to increase transparency in the rapidly evolving digital asset space. Hong Kong is currently among 76 markets that have committed to the implementation of CARF, signaling its intent to align with global tax reporting norms. This commitment involves establishing systems to collect and share data on crypto transactions with international partners.
Within the global landscape, Hong Kong is positioned as one of the 27 jurisdictions that have committed to undertaking their first data exchanges under the new framework by 2028. This puts the city on a specific timeline for compliance compared to other major financial centers. For example, 48 other jurisdictions, which include the United Kingdom and various members of the European Union, are planning to begin their first cross-border exchanges of crypto reporting data slightly earlier, in 2027. This earlier group will rely on data collected throughout 2026 to facilitate their reporting obligations, providing a preview of the framework’s effectiveness before Hong Kong’s deadline.
The context of these regulations is further defined by Hong Kong’s existing regulatory environment. As of early 2026, the city has already authorized 11 crypto trading platforms to operate under the supervision of the Securities and Futures Commission (SFC). Among these authorized entities are notable platforms such as Hashkey Global, OSL, and Bullish. These platforms are already subject to a variety of local requirements, including mandatory registration and transaction reporting, which align with the broader goals of the CARF proposal. The authorized platforms represent the core of the city’s regulated crypto market and will be the primary entities affected by the upcoming changes.
Impact
The potential impact of implementing CARF and CRS as currently proposed has raised alarms within the Hong Kong financial community. The HKSFPA warned that the current draft could saddle local institutions with a level of operational and liability risk that might hinder the growth of the local crypto industry. One of the primary concerns is the potential for uncapped per-account penalties, which could create significant financial uncertainty for firms. If these penalties are not limited, the cost of a single compliance error could be devastating for a service provider, potentially leading to insolvency or the withdrawal of services from the Hong Kong market.
Furthermore, the introduction of personal liability for directors is seen as a major shift in the regulatory burden. This could lead to a more cautious approach from industry leaders and might affect the recruitment of top talent for governance roles within crypto-related firms. By raising compliance risks, these measures could inadvertently discourage new entrants from establishing a presence in the city. The HKSFPA has argued that without clear penalty caps and safeguards for companies acting in good faith, the regulatory environment may become overly punitive, rather than protective. This shift could impact the overall stability of the local digital asset sector.
The broader impact on the city’s status as a regulated hub depends on how the government responds to these calls for moderation. While the industry supports mandatory registration and expanded reporting, the fear is that excessive liability could counteract the benefits of a regulated market. Finding a middle ground that ensures tax transparency through CARF while protecting local businesses from disproportionate risks is essential for maintaining the city’s attractiveness. The 11 authorized platforms currently operating, such as Hashkey Global, OSL, and Bullish, are particularly vulnerable to these changes as they already operate within the regulated space and would be the first to feel the impact of the new liability standards.
Outlook
Looking ahead, the timeline for Hong Kong’s implementation of these reporting standards is clear, with first data exchanges scheduled for 2028. This gives the government and industry stakeholders a window to refine the implementation details and address the concerns raised by the HKSFPA. The association’s push for softer elements, such as penalty caps and director safeguards, will likely be a focal point of future discussions between the industry and regulators. The goal is to create a framework that fulfills international obligations without stifling the local digital asset ecosystem or making it uncompetitive compared to other global jurisdictions.
The global progress of CARF implementation will also serve as a benchmark for Hong Kong. As 48 jurisdictions, including the United Kingdom and European Union members, begin their data exchanges in 2027 based on 2026 collections, Hong Kong will have the opportunity to observe the practical challenges and successes of these early adopters. The experience of these jurisdictions may influence how Hong Kong fine-tunes its own reporting mechanisms and liability structures before its 2028 deadline. This period of observation could be critical in determining whether the proposed penalties and liability rules are practical or if they require significant revisions to prevent industry flight.
The future of the 11 SFC-authorized platforms, including Hashkey Global, OSL, and Bullish, will be closely tied to these regulatory developments. As these platforms are already operational under the city’s licensing regime as of early 2026, they will be the first to navigate the transition to the new OECD standards. The association’s broad support for mandatory registration and expanded reporting suggests that while the industry is ready for higher transparency, the specific mechanics of penalties and liability remain the most contentious issues to be resolved. The final shape of these regulations will determine whether Hong Kong can successfully bridge the gap between international tax compliance and a thriving, regulated crypto market.
About the Author
