You can see the rules and regulations in other jurisdictions.
Blockchain technology is not governed by any specific regulatory framework. Hong Kong's financial laws and regulations apply to this technology and related businesses. HKMA and SFC have issued a number of statements clarifying their regulatory stances, however.1
In February 2015, the HKMA stated in a press release that Bitcoin is not a legal tender but a 'virtual commodity'. Bitcoin does not qualify as a payment or electronic money because it has no backing, either physically or from the issuer. According to the HKMA, Bitcoin and similar virtual commodities are not regulated.1
In December 2017, the SFC issued a circular regarding Bitcoin futures contracts and other cryptocurrency-related investment products. It cautioned that Bitcoin futures contracts traded on a futures exchange are regarded as futures contracts under the SFO, even if the assets they are based on aren't regulated in that way. The statement also noted that other cryptocurrency-related investment products may be classified as securities according to the SFO, depending on their features and terms.1
No existing regulations directly tackle cryptocurrency or token laundering. Though the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) largely applies to financial institutions like banks, SFC-licensed organizations, licensed insurance companies, and SVF issuers or money service operators, as well as certain non-financial businesses and professions such as law firms, it is not applicable to corporations dealing with cryptocurrencies and tokens unless they are considered a financial institution or DNFBP.1
In addition to the AMLO, corporations are liable under the Drug Trafficking (Recovery of Proceeds) Ordinance (Cap 405), or DTPRO and the Organized and Serious Crime Ordinance (Cap 455), or ORSCO, both of which hold it a criminal offence should they be aware, or have reasonable cause to believe, any 'property', as may encompass virtual commodities/assets such as Bitcoins or Ethereum, partially or completely represents revenues of drug trafficking or crime. They also need to adhere to UNATMO in regards to terrorism financing. Cumulatively, the DTPRO, ORSCO and UNATMO necessitate any transactions involving money laundering, terrorist financing or proceeds from illicit activities have an STR filing with the Joint Financial Intelligence Unit. Neglecting to comply is punishable by law.1
Hong Kong does not levy capital gains tax, withholding tax, or value added tax.1
Therefore, Hong Kong-sourced income from frequent cryptocurrency trading (e.g., Bitcoins and Ethereum, which are generally considered virtual commodities in Hong Kong) in the ordinary course of business may be treated as income for individual clients and profits for corporations, and subject to income tax and profits tax, respectively, regardless of whether trading takes place on cryptocurrency exchanges or fiat-to-cryptocurrency exchanges. It has been reported that the Inland Revenue Department (IRD) of Hong Kong does not maintain statistics specifically on the tax payable by persons engaged in virtual asset-related activities, so each case should be evaluated in light of its specific facts and circumstances, according to a press release issued on 3 April 2019. To assess the situation, the IRD would also seek relevant information from other tax authorities through the exchange of information mechanism under tax treaties.1
Virtual currencies in Hong Kong
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