Key Concerns Regarding CARF Adoption
Hong Kong’s crypto industry is urging the government to soften parts of its planned adoption of new global tax reporting rules, warning that overly strict implementation could create compliance and liability risks for local firms. The Hong Kong Securities & Futures Professionals Association (HKSFPA) stated that while it supports international transparency efforts, aspects of the Organisation for Economic Co-operation and Development’s (OECD) Crypto Asset Reporting Framework (CARF) and related Common Reporting Standard (CRS) amendments could place an excessive burden on crypto service providers.
CARF is designed to enable automatic cross-border exchange of tax information for crypto asset users, while CRS already governs information sharing for traditional financial accounts. Hong Kong is among 76 jurisdictions that have committed to rolling out CARF and is part of the first group targeting data exchanges by 2028.
Industry Backs Transparency but Warns of Compliance Risks
In a submission to the government, the HKSFPA said it broadly agrees with the direction of the proposals, including mandatory registration for crypto service providers and expanded transaction reporting requirements.
However, the group called for more flexibility in several areas. These include lighter obligations for firms with no reportable activity, stronger safeguards for personal data, and the option to transfer record-keeping responsibilities to regulated third parties when companies wind down operations.
The association also raised concerns over potential penalties. It warned that uncapped fines applied on a per-account basis, combined with personal liability for directors, could discourage participation and increase legal exposure for firms acting in good faith.
Crypto Hub Ambitions Collide with Global Tax Rules
The debate comes as Hong Kong continues its push to establish itself as a regulated global crypto hub. The city has introduced a licensing framework requiring centralized exchanges to meet strict standards around Know Your Customer (KYC), custody, market integrity, and anti-money laundering controls.
As of early 2026, 11 crypto trading platforms, including HashKey Global, OSL, and Bullish, have received authorization from the Securities and Futures Commission (SFC) to operate in the city.
Globally, CARF is already reshaping how governments track crypto activity for tax purposes. Several early adopters have begun collecting standardized data from exchanges, including users’ tax residency, account balances, and transaction histories.