BSV
$73.69
Vol 133.55m
2.01%
BTC
$95885
Vol 88714.55m
0.48%
BCH
$543.29
Vol 1600.98m
2.75%
LTC
$132.63
Vol 2810.22m
-2.81%
DOGE
$0.41
Vol 10497.99m
-1.87%
Getting your Trinity Audio player ready...

Hong Kong’s ambition to become a global hub for digital assets received a big boost this week when the city-state’s Treasury announced proposed tax breaks for the sector.

In his speech at Hong Kong Fintech Week, Treasury Secretary Christopher Hui noted that blockchain, digital assets, and AI are central to Hong Kong’s fintech ambitions. To boost adoption, the government intends to introduce tax concessions for digital assets as part of a broader move to revive the city’s fintech sector.

“Hopefully, by expanding the availability of tax concessions to this wider scope of assets eligible under our fund regime and our family office regime, we will be able to add that extra impetus and pull to this market on their development front,” Hui told the attendees.

Hui, who took over the Treasury docket in 2020, didn’t reveal any details about the looming tax breaks. However, they will mainly target institutional investors and are expected to be implemented by the end of 2024.

While the sector will welcome the tax breaks, it’s Hong Kong’s clear regulatory framework for the industry that has set it apart. Hui revealed that the government will continue offering legal clarity, pledging new regulations before the turn of the year.

Hong Kong has focused on regulating the platforms on which digital assets are held and traded. However, Hui revealed that the government will focus on the products by the year’s end, starting with stablecoins. It will issue new regulations for digital asset custodians and over-the-counter trading services beginning next year.

“Hopefully, by embracing a broader scope of service regulation, we will be able to grow these markets further,” he stated.

Financial Secretary Paul Chan, who gave the opening remarks at the event, also pledged to continue enabling regulations for the sector. He told the attendees that the government would continue adhering to the “same activity, same risk, same regulation” principle for VASPs, which puts them at par with traditional financial firms that offer similar products.

Chan also revealed that Hong Kong intends to issue more exchange licenses before the end of the year. The city’s securities regulator, the SFC, recently issued a license to HKVAX, which joined OSL and HashKey as the only licensed exchanges in the city under the new licensing regime.

SFC is reviewing applications from 14 other exchanges and has completed on-site inspections. According to SFC director Eric Yip, the agency expects investors to prefer the regulated entities as they offer better protection. However, if investors continue to mainly trade on the fringes, “then we need to reflect on why investors don’t pick our state-of-the-art regulatory framework.”

Hong Kong promotes AI in finance

Besides digital assets, Hong Kong is pushing to become an AI hub. The city has been caught in the middle of a global supremacy battle between the U.S. and China, denying its citizens access to popular AI services. American giants like OpenAI and Google (NASDAQ: GOOGL) have restricted access to ChatGPT and Gemini chatbots, respectively, from Hong Kong residents. Similar products from Chinese rivals like Baidu have also been complex for the city to access, according to local news outlets.

Despite the challenges, Hong Kong still harbors bold ambitions to integrate AI into every other sector, with finance being among the first it targets.

“In the financial market, AI is driving innovation in risk management, enhancing customer services, streamlining operations, preventing financial crimes and much more,” Chan stated at the fintech event.

Hui emphasized that despite the access challenges, Hong Kong is still among the global leaders in AI adoption.

“If you look at the current adoption of AI in our financial services sector, it’s as high as 38%, which far exceeds the global average of 26%. On that basis, we have a very solid foundation,” he told the audience.

To further encourage this adoption, the city’s Financial Services and Treasury Bureau (FTSB) issued its first-ever policy statement on integrating AI into the financial industry this week.

FTSB’s statement advocates for a dual-track approach that balances promoting adoption with addressing the risks of AI, such as data privacy and cybersecurity.

“After all, it is a balancing act – capturing opportunities and mitigating risks,” stated the FTSB, which oversees the financial services industry alongside the central bank.

On the opportunities side, the bureau urged financial firms to leverage AI in data analysis and research to support investment decisions, wealth management, customer service, fraud detection, and workflow automation. However, it also called for caution, as AI poses risks such as a lack of data privacy and transparency, bias and hallucinations, and fraud.

To address the lack of access to the latest AI models, the Hong Kong University of Technology and Science has developed InvestLM, an AI model that has been available to financial service providers for advisory and training services.

Watch: Blockchain & AI unlock possibilities

Recommended for you

Ripple’s XRP takes off like rocket—what’s fueling this rise?
While still below its all-time high of $3.40 seven years ago, Ripple's XRP token has taken off like a rocket...
December 3, 2024
FCA research shows 12% of UK adults own digital assets
The U.K.'s FCA published a research on consumer attitudes, finding that 12% of adults owned digital assets and that awareness...
December 3, 2024
Advertisement
Advertisement
Advertisement