Hong Kong industry body urges softer CARF penalties as city aligns with global crypto reporting

The Hong Kong Securities & Futures Professionals Association has signaled conditional backing for the OECD-driven crypto reporting regime while pressing local authorities to temper enforcement mechanics that it says would burden market participants. The association accepts the need for mandatory registration and wider transaction reporting as part of a global push to make cross-border crypto flows visible to tax authorities, but it argues that a one-size-fits-all penalty approach would create outsized compliance exposures for firms and board members. Of particular concern are uncapped per-account fines and provisions that could attach personal liability to directors; the lobby wants clear ceilings and safe-harbour language for entities that make reasonable compliance efforts. It also highlights gaps in privacy safeguards and asks for tighter rules to limit unnecessary data transfers and to strengthen protections for sensitive taxpayer information. Operationally, the group recommends a mechanism to transfer record-keeping obligations to regulated service providers if an operator exits the market, a change intended to prevent data loss and reduce orphaned-reporting risk. These requests land while Hong Kong is actively positioning itself as a regulated crypto center, tightening KYC, custody, and AML controls for licensed trading platforms. The industry’s appeal reflects the tension between international tax transparency—driven by CARF and related CRS amendments—and the practical burdens of implementing high-frequency, granular reporting in a nascent asset class. If regulators reject the suggested mitigations, some smaller or newer providers may face disproportionate compliance costs or heightened legal exposure that could chill market participation. Conversely, balanced relief on penalties and clarified data-handling rules would lower the operational bar and reduce legal uncertainty for directors, supporting the city’s hub ambitions. Policymakers will need to weigh the reputational and fiscal benefits of strict enforcement against the potential of regulatory overreach to shrink domestic market capacity. The next phase of implementation choices will determine whether Hong Kong can both meet international reporting commitments and preserve a competitive, resilient crypto services sector.