Hong Kong is preparing to introduce a policy by the end of the year to extend tax incentives to family offices and private funds investing in crypto on behalf of wealthy clients.

Christopher Hui, Hong Kong’s secretary for financial services and treasury, said China’s special administrative region wants to ensure it has an “enabling environment for blockchain, particularly its financial applications.”

“We get asked all the time… what are the incentives… from the government in terms of growing this sector,” Hui said at a conference on Sunday. opening speech at Hong Kong FinTech Week.

Hong Kong already offers tax incentives to certain private funds and family investment vehicles, provided they meet specific requirements and invest in designated areas.

This includes an exemption from income tax on standard rate of 16.5%, while carried interest for private equity managers is taxed at 0%. Additionally, certain transactions may benefit from stamp duty relief.

The upcoming policy aims to support crypto development and investment in regulated products as the region attempts to transform into a global digital asset hub.

This follows Hong Kong’s move to regulate virtual asset trading, which began two years ago with a pilot program under the Securities and Futures Commission, laying the groundwork for a formal licensing regime.

The Virtual Asset Trading Platform (VATP) regime, implemented in June 2023, aims to improve investor protection and strengthen compliance standards for digital asset platforms.

In pursuing this specific policy, Hui said the government will introduce a stablecoin policy on the “product front” by the end of the year.

On the services front, Hong Kong will begin regulating custodians by “developing the appropriate regime” over the next year, while consulting market participants on over-the-counter crypto trading, Hui said.

Exactly how he plans to do this remains unclear. The SFC did not immediately respond to Decrypt request for comment.

“By adopting broader regulation of services, we will be able to further develop this market,” he said.