A Hong Kong industry group has urged the city’s regulators to ease aspects of the Organisation for Economic Co-operation and Development’s (OECD) crypto reporting rules ahead of its implementation.

Association Pushes To Soften CARF Requirements

On Monday, the Hong Kong Securities & Futures Professionals Association (HKSFPA) released a response to the implementation of the OECD’s Crypto Asset Reporting Framework (CARF) and the related amendments made to Hong Kong’s Common Reporting Standard (CRS).

In their official response, the association shared its concerns about certain elements of the CARF and CRS amendments, warning that they could create operational and liability risks for market participants.

Notably, the HKSFPA affirmed that it mostly supports the proposals, but urged regulators to ease the record-keeping requirements for dissolved entities. “We generally agree with the six-year retention period to align with existing inland revenue and CRS standards,” they explained, “but we have concerns regarding the obligations placed on individuals post-dissolution.”

The industry group argued that holding directors or principal officers personally liable for record-keeping after dissolution poses significant practical challenges, noting that former officers of dissolved companies may lack the resources, infrastructure, and legal standing to maintain sensitive personal data of former clients.

As a result, they suggested the government “allow for the appointment of a designated third-party custodian (such as a liquidator or a licensed corporate service provider) to fulfill this obligation, rather than placing indefinite personal liability and logistical burden on former individual officers.”

Moreover, the association also cautioned that the proposed uncapped per-account penalties for minor technical errors. They asserted that this could lead to “disproportionately astronomical fines for systemic software errors affecting thousands of accounts where there was no intent to defraud.”

To solve this, they proposed a “reasonable cap” on total penalties for unintentional administrative errors or first-time offenses to ensure that the per-account calculation “is reserved for cases of willful negligence or intentional evasion.”

Additionally, the group suggested a “lite” registration or a simplified annual declaration process for Reporting Crypto-Asset Service Providers (RCASPs) that anticipate filing Nil Returns, to reduce administrative costs while still satisfying the Inland Revenue Department’s oversight requirements.

Hong Kong’s Crypto Hub Efforts

Notably, Hong Kong is among the 76 markets committed to implementing the upcoming crypto reporting framework, which is the OECD’s new global standard for exchanging tax information on crypto assets.

The CARF is designed to prevent tax evasion by bringing crypto users across borders under global tax transparency rules, similar to the OECD’s existing CRS for traditional finance. Hong Kong will be among the 27 jurisdictions that will begin their first cross-border exchanges of crypto reporting data in 2028.

Over the past few years, Hong Kong financial authorities have been actively working to develop a comprehensive framework that supports the expansion of the digital assets industry, part of its strategy to become a leading crypto hub in the world.

As reported by Bitcoinist, the city is exploring rules to allow insurance companies to invest in cryptocurrencies and the infrastructure sector. The Hong Kong Insurance Authority recently proposed a framework that could channel insurance capital into cryptocurrencies and stablecoins.

Moreover, the Hong Kong Monetary Authority (HKMA) is expected to grant the first batch of stablecoin issuer licenses in the first few months of the year. The HKMA enacted the Stablecoins Ordinance in August, which directs any individual or entity seeking to issue a stablecoin in Hong Kong, or any Hong Kong Dollar-pegged token, to obtain a license from the regulator.

Multiple companies have applied for the license, with over 30 applications filed in 2025, including logistics technology firm Reitar Logtech and the overseas arm of Chinese mainland financial technology giant Ant Group.

Hong Kong’s crypto industry is warning that the city’s planned adoption of new global tax reporting rules could produce unintended consequences if regulators do not adjust how the framework is applied in practice.

The concerns center on the Crypto-Asset Reporting Framework (CARF), a standard developed by the Organisation for Economic Co-operation and Development to enable the automatic cross-border exchange of tax information related to crypto-asset transactions.

Hong Kong officials say the CARF is needed to protect the city’s role as an international financial hub, as OECD peer reviews increasingly judge jurisdictions on how well rules are enforced, not just whether they exist.

Hong Kong Weighs CARF as Industry Seeks Smoother Implementation

In a detailed submission sent this week to the Financial Services and the Treasury Bureau, the Hong Kong Securities & Futures Professionals Association urged authorities to refine how the rules are rolled out.

While the group said it broadly supports the goal of tax transparency, several elements of the proposed regime could expose local crypto firms to operational strain, legal uncertainty, and disproportionate penalties.

The association represents professionals working across securities, futures, and virtual asset markets and framed its comments as an effort to ensure Hong Kong remains competitive as a financial hub while meeting international obligations.

CARF is designed to close gaps left by existing tax reporting systems by capturing crypto-specific activity that falls outside traditional financial accounts.

Under CARF, crypto-asset service providers would be required to collect and report detailed information on users and transactions, which would then be shared automatically with other participating jurisdictions.

Hong Kong is among 76 markets that have committed to the framework and is part of the first group of 27 jurisdictions expected to begin exchanging data by 2028.

The government plans to complete legislative amendments in 2026, following a public consultation that began late last year.

Progress Welcomed, but Data Rules Raise Red Flags

Industry participants say the direction of travel is clear, but the details matter.

One major concern is data collection, as the association said most firms favor a “wider approach,” collecting information on both reportable and non-reportable clients upfront.

However, it warned that without explicit legal protection, firms could face conflicts with Hong Kong’s personal data privacy rules for holding information on clients who are not yet reportable.

Record-keeping requirements are another pressure point. While the industry accepts a six-year retention period in line with existing tax rules, it raised alarms about proposals that could hold directors or senior officers personally responsible for maintaining records after a company is dissolved.

It argued that former officers may lack the legal authority or infrastructure to securely store sensitive client data once an entity no longer exists.

Firms Push Back on CARF Fines and Tight Reporting Deadlines

Penalties under CARF and the amended CRS also drew scrutiny.

While the industry supports the introduction of administrative penalties as an alternative to criminal prosecution, it warned that fines calculated on a “per account” basis could spiral into massive liabilities for firms hit by technical or software errors affecting thousands of users.

The association called for reasonable caps for unintentional breaches and a graduated approach that distinguishes between administrative mistakes and deliberate non-compliance.

Operationally, firms welcomed plans for electronic filing but said reliance on manual XML uploads could introduce avoidable risks.

Large institutions, in particular, are pushing for direct API connections to allow automated reporting.

They also warned that the proposed five-month filing deadline after year-end could be tight in the early years and suggested grace periods as systems are tested and refined.

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