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On December 9, 2025, Hong Kong, China, announced through the government gazette that the authorities are launching public consultations on the implementation of the Crypto-Asset Reporting Framework (CARF) and the revision of the Common Reporting Standard (CRS). The goal is to automatically exchange tax-related information on crypto-asset transactions with relevant partner tax jurisdictions from 2028, and implement the revised new version of CRS rules from 2029.Although Hong Kong has not yet signed the CARF Multilateral Competent Authority Agreement (MCAA), it has actively determined a local implementation timetable. This arrangement reflects Hong Kong’s balancing considerations between integrating with the international system, maintaining its own regulatory rhythm, and maintaining market stability.Taking this public consultation as an opportunity, this article will briefly review the contents of the CARF framework, introduce Hong Kong’s current tax information exchange system, sort out the evolution of crypto asset supervision, and thereby analyze the impact of Hong Kong’s implementation of CARF on different market entities, aiming to provide useful reference for industry practitioners or investors on compliance responses.
1. Overview of CARF Framework
The Crypto-Asset Reporting Framework (CARF) is an international standard for the automatic exchange of tax information promoted by the Organization for Economic Cooperation and Development (OECD) to standardize cross-border tax information disclosure related to crypto-assets.CARF stipulates that crypto asset service providers (RCASPs) with reporting obligations must collect tax-related information on customers and related transactions, report it to the tax authorities in their jurisdictions, and ultimately conduct automatic international exchange of information between tax authorities.The mechanism of CARF is similar to that of CRS in the traditional financial field, but CARF focuses on the buying and selling, exchange, custody and transfer of crypto-assets, in order to reduce the space for taxpayers to use a decentralized environment to hide taxable income or assets, and to improve the tax transparency of crypto-assets.The CARF framework is being promoted and implemented globally and is expected to help crypto-asset transactions achieve a level of tax information disclosure comparable to that in the traditional financial sector, indicating that the blueprint for crypto-asset tax transparency is gradually becoming clear.
2. Information exchange in Hong Kong’s traditional financial sector
Hong Kong’s existing international tax information exchange system is mainly built in the traditional financial field.Hong Kong is one of the jurisdictions that has adopted the OECD tax transparency standards earlier and more comprehensively.As early as 2014, the Hong Kong government announced its support for the OECD’s automatic exchange of financial account information (AEOI) arrangement, and revised the Inland Revenue Ordinance in 2016 to establish a supporting legal framework.Under the CRS mechanism, local financial institutions (banks, custodians, investment entities, etc.) with reporting obligations need to identify the tax resident status of account holders and their controllers, and report information to the Hong Kong Inland Revenue Department on eligible overseas tax resident accounts, and the Hong Kong Inland Revenue Department will automatically exchange information with other partner jurisdictions.Regarding the specific implementation of the CRS mechanism, Hong Kong started the first automatic exchange of financial account tax-related information with the first batch of partner jurisdictions (Japan, the United Kingdom, etc.) in 2018.Since then, the number of “reporting tax jurisdictions” that exchange tax information with Hong Kong under the schedule of Hong Kong’s “Inland Revenue Ordinance” has continued to expand, and by 2020 it has increased from the original 75 to more than 120.
In addition to implementing CRS, Hong Kong is also actively developing other forms of international cooperation in tax information exchange.In November 2014, Hong Kong and the United States signed the “Intergovernmental Agreement to Cooperate to Implement the U.S. Foreign Account Tax Compliance Act (FATCA)” (FATCA IGA).According to the agreement and the FFI Agreement (Foreign Financial Institution Agreement) thereunder, starting from 2015, eligible Hong Kong financial institutions must identify their U.S. accounts and, subject to the consent of the account holders, report the account balance, interest, dividends and other relevant information to the U.S. Internal Revenue Service (IRS) every year.In addition, Hong Kong has established an institutional framework for the automatic exchange of CRS financial account information with multilateral partners by joining the Convention on Mutual Administrative Assistance in Tax Matters (MAC) and signing the Common Reporting Standard Multilateral Competent Authority Agreement (CRS-MCAA).
In terms of traditional financial account information exchange, Hong Kong has formed a relatively mature technical foundation and institutional system.Against this background, the introduction of CARF in Hong Kong is an expansion and transformation of the existing CRS/FATCA information exchange model in the field of crypto assets. Therefore, this article will continue to explore the interactive relationship between the development of crypto asset supervision in Hong Kong and the tax ecology of the traditional financial circle.
3. Evolution of regulatory policies in Hong Kong’s crypto-asset sector
In terms of crypto asset supervision, Hong Kong continues to improve its regulatory system and strives to achieve a balance between market innovation and risk prevention and control.
Since 2018, the Hong Kong Securities and Futures Commission has successively issued regulatory statements and guidelines, gradually forming a regulatory framework for virtual assets.Later, in 2019, a “sandbox” supervision mechanism for virtual asset trading platforms was launched for professional investors, and the Anti-Money Laundering Ordinance (AMLO) was finally revised in 2023 to formally establish a legal licensing system for virtual asset trading platforms.At the same time, Hong Kong approved the issuance of Asia’s first institutional-grade products such as virtual asset spot ETFs in 2024, aiming to introduce investor protection and risk management mechanisms from traditional financial markets into the virtual asset ecosystem.Overall, the regulatory focus at this stage is still focused on risk control of crypto asset activities, and has not yet fully covered a wider range of trading scenarios.
As the market scale expands and investor participation increases, Hong Kong revised the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) in 2022 and officially implemented the Virtual Asset Service Provider (VASP) license system from June 2023. The Securities and Futures Commission (SFC) is responsible for supervising licensed entities engaged in the virtual asset trading platform (VATP) business.This system requires that all platforms operating in Hong Kong and brokering virtual asset transactions as “intermediaries”, such as holding currency on behalf of customers, operating trading markets, and keeping virtual assets on behalf of customers, must obtain a license from the Securities Regulatory Commission.Licensed platforms must comply with a series of requirements similar to securities services, including customer asset segregation, capital adequacy, platform security, compliance and auditing.However, this system only covers electronic platforms and businesses that touch customer assets, and does not include OTC scenarios such as physical currency stores and over-the-counter transactions within the scope of supervision.
In order to fill the gap in the regulatory system, from February to April 2024, the Financial Secretary and the Treasury Bureau (FSTB) of Hong Kong launched the first round of consultation on the “Virtual Asset OTC Trading Service Licensing System” and planned to include physical OTC trading under supervision for the first time.Its main content covers spot exchanges between virtual assets and legal currencies, as well as related legal currency remittance services (such as exchanges between BTC, USDT and Hong Kong dollars/US dollars).The second round of “Legislative Proposal to Regulate Dealing in Virtual Assets” released in June 2025Assets), the authorities have further established a unified licensing and regulatory framework covering virtual asset service providers. They plan to require all entities that provide virtual asset trading or custody services in Hong Kong, regardless of service form or channel, to apply for a license or register with the SFC. Banks and stored value payment institutions participating in virtual asset activities are supervised by the Hong Kong Monetary Authority (HKMA).Stablecoin issuers can enjoy exemptions if they only issue or redeem in the primary market and are approved by the Hong Kong Monetary Authority.In February 2025, the Hong Kong Securities and Futures Commission also released the “A‑S‑P‑I‑Re” regulatory roadmap, clarifying that Hong Kong will build a more sound virtual asset regulatory ecosystem through the five pillars of “access, protection, products, infrastructure, and connection”.
Hong Kong is promoting the regulation of virtual assets from partial pilots to gradually covering the entire chain, and the outline of the regulatory system is becoming more complete.
4. Potential impact of CARF implementation on the Hong Kong crypto market
Based on the understanding of the principles of the CARF framework and the grasp of Hong Kong’s crypto regulatory policy trends, this article discusses the possible impact of CARF from the perspective of four market entities, including cryptocurrency trading platforms, individual investors, custodians and traditional financial intermediaries.
4.1 Cryptoasset trading platform
If CARF is implemented in Hong Kong legislation, licensed crypto-asset trading platforms and other qualified crypto-asset service providers may be recognized as RCASPs.Relevant platforms will be required to conduct tax due diligence on customers, verify tax resident status, and collect and submit account and transaction information in accordance with CARF data requirements.At the practical level, the platform may need to update the KYC process, add data fields, and upgrade internal systems to generate reports that meet relevant requirements.Fulfilling reporting obligations may increase the platform’s compliance costs and operational burdens. At the same time, it will also help the platform improve its customer review and internal control capabilities and optimize its internal trading environment.
4.2 Individual investors
Individual investors may become the type of subjects who will experience the most direct impact of CARF after its implementation.Specifically, if the investor is a Hong Kong tax resident, the transactions such as buying, selling, exchanging or paying crypto assets conducted through the local platform will no longer just stay in the backend records of the platform, but may be automatically exchanged to other countries through the Hong Kong Inland Revenue Department.If the investor is not a tax resident of Hong Kong, when he or she conducts transactions through a Hong Kong RCASP, his or her account and transaction information may also be exchanged with the tax authorities of his or her home country.In other words, it will be difficult for investors to avoid paying taxes by relying on crypto trading features such as decentralization and anonymity.
4.3 Cryptoasset custody institutions
The extent of CARF’s impact on crypto-asset custody institutions depends on the institution’s business scope and nature of activities.If it only provides pure custody (such as cold wallet custody, custody reports, etc.) and does not directly match transactions for customers, it may theoretically be regarded as a “custodial financial institution”, and its information reporting will still mainly rely on existing channels such as CRS; if the custody institution also provides transaction matching or exchange services (such as an integrated platform for custody and on-site trading), it may fall into the scope of RCASP and be required to perform CARF reporting obligations similar to those of crypto trading platforms, and build a customer tax due diligence and data reporting mechanism with reference to crypto trading platform standards.
4.4 Banks and traditional financial intermediaries
Although CARF directly regulates RCASPs that provide crypto-asset services rather than traditional financial intermediaries such as banks, the compliance ecology of traditional finance may also be affected.For example, when banks implement AML or KYC requirements, they may need to more systematically understand whether customers transfer large amounts of funds through crypto transactions.In addition, when financial intermediaries provide wealth management and family office services, they also need to take crypto assets into consideration in overall tax planning.
5. Coping strategy: shift from wait-and-see to proactive compliance
As mentioned above, the implementation of CARF may have a wide range of impacts on market entities. This article proposes possible response strategies:
For crypto trading platforms, you can pre-evaluate whether your business falls within the scope of RCASP.If applicable, the corresponding customer due diligence process can be deployed and improved in advance, customer information forms can be updated, and a systematic data collection and reporting mechanism can be established.At the operational level, the platform can also refer to the current compliance model of FATCA/CRS, purchase or develop reporting tools that comply with CARF XML Schema requirements, and arrange professional training for internal personnel.At the same time, we will closely follow up on the specific implementation details and technical standards issued by the Hong Kong Inland Revenue Department, maintain communication with regulatory authorities during the legislative consultation stage, and adjust processes and adapt to the rules in advance.
For individual investors, it is necessary to systematically organize crypto-asset transaction records, retain all transaction flow and cost documents, expense vouchers, etc., to ensure that the information is complete and consistent when filing tax returns.If investors hold cryptocurrency accounts in Hong Kong or other jurisdictions, they need to make advance arrangements for reporting obligations for overseas assets or income in the context of tax residency status in multiple countries and potential cross-border information exchange, so as to reduce compliance risks arising from inconsistent connections between different reporting systems.When choosing a trading platform, you should also give priority to licensed or regulated platforms to ensure that their data quality and reporting obligations are relatively stable.In general, investors need to improve their understanding of tax residency status, reporting obligations and information exchange rules, and seek the assistance of professional tax advisors when necessary.
For crypto custodians, if their business involves the sale, exchange or matching of crypto assets, they need to establish channels for retaining and reporting crypto transaction data as early as possible.At the same time, even if it only provides custody services, it still needs to combine CARF and the existing CRS system to evaluate the scope of its possible reporting obligations, maintain a clear division of business lines, and improve internal controls.
6. Conclusion
To sum up, Hong Kong’s introduction of CARF and simultaneous advancement of CRS revisions are not only an institutional upgrade in line with the international trend of tax transparency, but also a natural extension in the context of the gradual deepening of crypto-asset regulation.Based on the existing CRS, FATCA information exchange system and crypto asset license regulatory framework, Hong Kong has feasible conditions for implementing CARF at both the technical and institutional levels.The implementation of CARF is expected to further enhance the tax transparency of Hong Kong’s crypto asset market, which will have an impact on trading platforms, custodians, individual investors and traditional financial intermediaries.In the process of CARF advancement, various entities should make differentiated preparations according to their own roles.With the implementation of legislation and the gradual clarification of technical details, Hong Kong’s virtual asset supervision system will also enter a more systematic and stable development stage.
