Hong Kong authorities have reportedly proposed exempting hedge funds, private equity funds, and wealthy individuals from paying taxes on gains from cryptocurrencies. The proposals, aimed at making the Chinese special administrative region a global financial hub, also include gains on private credit investments and other assets.

As noted in a Financial Times report, Hong Kong authorities circulated a 20-page document explaining the rationale behind the proposal and how the proposal aligns with the goals of asset managers seeking to establish operations in the region.

Hong Kong aims to become a hub for cryptocurrency investment funds as investors assess the implications of a Donald Trump presidency. During his campaign, Trump vowed to reverse President Joe Biden’s policies, which critics argued drove crypto startups to relocate to more favorable regions like Dubai, Hong Kong, and Singapore.

Trump’s nominees for key administration posts suggest he intends to follow through on these pledges. This prospect, combined with Hong Kong’s rivalry with Singapore to become the top finance destination, has prompted the former to propose regulations providing “certainty.”

According to Patrick Yip, vice chair and international tax partner at Deloitte China, such certainty benefits family offices.

“This is an important step in boosting Hong Kong’s status as a financial and crypto trading hub,” Yip said.

If adopted, the proposals would attract wealthy Chinese individuals who are setting up private investment vehicles outside the mainland. Such changes will also position Hong Kong alongside Singapore and Luxembourg in terms of fund launches. Meanwhile, UBS CEO Sergio Ermotti predicts that Hong Kong’s progress will likely supplant Switzerland as the world’s top wealth management hub.

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