Comparison of Cryptocurrency Policies between Hong Kong and Singapore

Comparison of Cryptocurrency Policies in Hong Kong and Singapore

Hong Kong and Singapore are both well-known financial centers in Asia, and with the rise of cryptocurrencies, both places have started to compete to become the cryptocurrency hub of Asia. Cryptocurrency is a digital currency that is protected and managed through cryptography and blockchain technology, and has features such as anonymity, decentralization, and decentralization. Currently, many countries around the world have begun to explore and formulate policies and regulations related to cryptocurrencies, and Hong Kong and Singapore are no exception.

1. Definition and classification of cryptocurrency in Hong Kong and Singapore

First, we need to understand the definition and classification of cryptocurrencies in Hong Kong and Singapore. In Hong Kong, cryptocurrency is referred to as “virtual assets” and is divided into three categories: security tokens, payment tokens, and utility tokens. Security tokens are tokens that can be converted into stocks, bonds, or similar securities; payment tokens are tokens used to purchase goods and services; and utility tokens refer to all tokens other than security tokens and payment tokens.

In Singapore, cryptocurrency is referred to as “digital assets” and is divided into three categories: payment tokens, utility tokens, and security tokens. Payment tokens are tokens used to purchase goods and services; utility tokens refer to tokens that have practical application scenarios, such as virtual items in blockchain games; and security tokens refer to tokens that can be converted into stocks, bonds, or similar securities.

• Hong Kong Monetary Authority and Central Bank of the UAE Strengthen Cooperation on Virtual Asset Regulation and Development
• Notice of the General Office of the People’s Government of Beijing Municipality on Printing and Distributing “Several Measures to Promote the Innovative Development of General Artificial Intelligence in Beijing”
• Will the cryptocurrency policy in the US and Canada see a new direction in the 2024 presidential election?

2. Cryptocurrency tax systems in Hong Kong and Singapore

Hong Kong and Singapore differ in their taxation of cryptocurrencies. Institutional investors engaged in cryptocurrency-related businesses in Singapore may be required to pay up to 17% income tax, while those engaged in cryptocurrency-related businesses in Hong Kong may be required to pay up to 16.5% capital gains tax.

On April 17, 2020, Singapore released the “Cryptocurrency Income Taxation Guide” which classified cryptocurrencies as payment tokens, utility tokens, and security tokens, and stipulated specific provisions on whether and how the income generated from different types of cryptocurrencies acquired, held, and disposed of is subject to taxation. In addition, Singapore’s taxation of cryptocurrencies is relatively loose, clarifying that cryptocurrencies are legal and do not impose capital gains tax, but impose income tax at a rate of 17%.

On March 27, 2020, Hong Kong issued the “Interpretation and Execution Guidelines No. 39 (Revised Edition) of the Tax Ordinance,” which stipulates that the tax treatment of digital asset transactions depends on the nature and purpose of the digital assets involved, and the specific tax treatment also depends on the nature of the assets rather than their form. Hong Kong currently does not levy income tax on capital gains arising from the issuance, holding or disposal of cryptocurrencies. However, if the income from dividends, interest and other returns allocated to investors holding security tokens originates in Hong Kong, the distribution agency must withhold and pay advance income tax on their behalf.

III. Content and Framework of Cryptocurrency Regulation in Hong Kong

In Hong Kong, the regulatory bodies for cryptocurrencies are the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA). The SFC is responsible for regulating security and utility tokens, while the HKMA is responsible for regulating payment tokens.

Hong Kong began regulating cryptocurrencies in 2019 and issued the “Regulatory System for Virtual Asset Service Providers” in 2020. This regulation requires all companies that provide cryptocurrency trading or wallet services in Hong Kong to obtain a virtual asset service provider (VASP) license. In addition, the Hong Kong Securities and Futures Commission has also issued guidance on digital assets, which sets out detailed provisions on the issuance, trading and fund investment of digital assets.

The regulatory framework for cryptocurrencies in Hong Kong mainly includes registration systems, anti-money laundering policies, investor protection policies, and market stability policies. According to Hong Kong law, all companies engaged in cryptocurrency transactions must register and comply with anti-money laundering and KYC (know-your-customer) policies. In addition, the SFC has also issued guidelines on digital asset trading platforms, requiring them to provide transparent information to investors and ensure the security and reliability of the trading platform.

IV. Content and Framework of Cryptocurrency Regulation in Singapore

In Singapore, the regulatory body for cryptocurrencies is the Monetary Authority of Singapore (MAS). MAS is responsible for formulating and implementing policies and regulations related to digital assets and regulating digital asset exchanges. Singapore’s regulation of cryptocurrency mainly focuses on anti-money laundering and investor protection.

In terms of anti-money laundering, the Monetary Authority of Singapore (MAS) issued the “Guidelines to Combat Money Laundering and Terrorist Financing” in 2014, which includes regulatory requirements for virtual currency service providers. Since then, MAS has continuously updated and improved its relevant policies, including the Payment Services Act issued in 2019, which stipulates the AML/CFT requirements that virtual currency service providers need to comply with, and the Digital Payment Services Regulations launched in 2020, which brings virtual currency service providers under regulatory oversight.

In terms of investor protection, MAS issued a notice on virtual currency risks in 2017, reminding the public to be aware of the risks associated with virtual currency investments and emphasizing that investors should exercise caution when investing in virtual currencies. Based on this, MAS has also launched a series of investor protection measures, such as requiring cryptocurrency exchanges to obtain MAS licenses or registrations, requiring exchanges to conduct KYC (know-your-customer) and AML (anti-money laundering) checks on users, and so on.

It is worth noting that Singapore is one of the earliest countries in the world to include digital currencies in its tax system. In 2019, the Singapore Ministry of Finance announced that virtual currencies would be subject to consumption tax, further regulating the digital currency market.

5. Comparison of Hong Kong and Singapore’s regulatory policies for the cryptocurrency industry

First of all, in terms of regulatory stance, both Singapore and Hong Kong have adopted an open attitude. The Monetary Authority of Singapore (MAS) has taken a positive attitude towards digital currencies and is trying to incorporate them into a formal regulatory framework. The Hong Kong Securities and Futures Commission has issued the first license for a cryptocurrency trading platform, indicating that the Hong Kong government is willing to work with the cryptocurrency industry to promote strict regulatory measures. However, it should be noted that Singapore is stricter in its regulation, requiring that digital currency exchanges must obtain MAS licenses and comply with relevant regulations, making it one of the most regulated digital currency markets in the world. Although Hong Kong has also begun to introduce a series of regulatory measures, its execution is relatively lenient, and it has not been able to ensure the safety and stability of the market.

Secondly, in terms of exchange regulation, Singapore is stricter than Hong Kong. In Singapore, digital currency exchanges must comply with multiple regulations, such as KYC policies, AML policies, capital adequacy requirements, etc. MAS is very strict in checking the compliance of exchanges and conducts several inspections every year, which also ensures good control of the risk of exchanges. Although Hong Kong has begun to introduce some regulatory policies, it still needs to be improved compared to Singapore.

Once again, in terms of regulatory content, Singapore’s regulatory scope is broader, covering not only cryptocurrency exchanges but also digital currency payment institutions and initial token offerings (ICOs). MAS has stricter regulatory requirements for these institutions, requiring them to comply with more regulations and standards. Hong Kong currently primarily regulates cryptocurrency exchanges and has not yet involved other digital currency-related institutions.

Additionally, in terms of anti-money laundering (AML) policies, Singapore has stricter AML requirements for cryptocurrency exchanges, requiring exchanges to implement KYC policies and establish comprehensive AML procedures for risk management. Hong Kong does not have clear AML policies, only requiring cryptocurrency exchanges to take measures to reduce the risks of illegal activities such as money laundering and terrorist financing.

Finally, there are also some differences in intellectual property protection between the two regions. In Singapore, although digital currencies themselves do not have special intellectual property protection, related technologies and innovations can still apply for patents and other intellectual property protection. In Hong Kong, the protection of intellectual property for digital currencies is relatively weak, and only general intellectual property protection methods such as trademarks or copyrights can be used for rights protection.

Overall, the cryptocurrency policies in the two regions have pros and cons. Singapore’s strict regulatory measures can effectively protect the healthy development of the digital currency market, but may also limit market innovation and development speed. Hong Kong’s policies are relatively loose, although attracting many cryptocurrency trading platforms to settle in, it also faces the problems of market instability and security risks. In the future, both regions need to continue to improve their policies to find a balance point that ensures market security and stability while promoting innovation and development, in order to promote the long-term development of the digital currency market.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!