Hong Kong’s financial industry, led by the Hong Kong Securities & Futures Professionals Association (HKSFPA), has pressed regulators to ease aspects of the Crypto‑Asset Reporting Framework (CARF) and linked CRS amendments. The lobby argues the proposed rules risk heavy operational burdens and open‑ended liability for firms and executives in the city’s digital‑asset sector.
The industry formally lodged its concerns during a public consultation launched on December 9, seeking changes that it says would preserve tax transparency while keeping compliance practicable for market participants.
Industry submissions focus on five practical areas where Hong Kong’s interpretation of CARF diverges from what firms consider workable: penalties, personal liability, record‑keeping, registration burdens and electronic filing. Firms accept the government’s broader aim of enhanced information exchange but want clearer limits and more automation to reduce routine compliance risk.
The industry broadly rejects unlimited per-account fines and is calling for explicit caps, along with a clearly codified “reasonable excuse” defense to prevent disproportionate penalties arising from technical or administrative errors. At the same time, industry groups oppose open-ended personal liability for directors associated with dissolved entities, arguing for clearer rules that limit post-dissolution exposure and encourage qualified professionals to take on directorships without excessive risk.
From an operational standpoint, while companies accept a six-year record-retention period, they propose that records of dissolved entities be managed by independent custodians—such as liquidators or licensed corporate service providers—rather than former directors. In addition, industry bodies advocate for a “light-touch” register or a simplified annual return for zero-filing entities to ease the administrative burden on private investment vehicles and similar low-activity structures.
The sector also strongly favors electronic filing through API connectivity and standardized XML frameworks, calling for detailed technical specifications and a one-year testing period prior to launch to ensure smooth integration.
Timeline, risks and market implications
Hong Kong opened the consultation on December 9, 2025; feedback will be accepted until February 6. The city’s draft aligns with OECD objectives, but industry pushback highlights tensions between international standards and local operational realities.
‘Forcing directors or principal officers to remain responsible for records after a company has formally ceased operations could create open‑ended and potentially indefinite liabilities,’ the HKSFPA said, arguing this could deter talent from joining crypto firms.
Practically, the debate centers on proportionality. Per‑account penalty proposals are seen as particularly risky for high‑volume platforms, where a minor glitch could cascade into outsized fines. Likewise, mandating manual XML uploads without API alternatives would increase error rates and compliance costs for large institutions.
Investors, service providers and compliance teams will watch how the Inland Revenue Department responds to these submissions. The government projects the first CARF data exchange to begin in September 2028, placing extra weight on the consultation outcome: responses to the Feb. 6, deadline will shape whether rules are enforceable without hampering Hong Kong’s bid to remain a competitive crypto hub.
