Hong Kong Unveils AI Guidelines for Finance Sector and Considers Tax Breaks for Digital Assets

Hong Kong Sets AI Guidelines for Finance, Eyes Tax Break for Digital Assets | PYMNTS.com

Hong Kong has unveiled its inaugural policy guidelines focused on the use of artificial intelligence in finance, alongside a potential tax incentive for digital assets, in a bid to strengthen its position as a premier business hub in Asia. According to Bloomberg, the new measures aim to create a supportive yet regulated environment for AI and digital asset investment, central to Hong Kong's strategy to draw international investors back to its markets. On Monday, senior government officials announced a unified framework designed to enable various regulatory bodies to develop sector-specific guidelines on AI, a technology seen as critical for the future of finance and other industries. As part of this strategic push, the city has also suggested extending a tax break on digital asset ownership, including cryptocurrencies, with legislation expected by the end of the year. "Hong Kong's financial sector has what it takes to promote AI adoption -- sizable markets and rich scenarios," noted Secretary for Financial Services and the Treasury Christopher Hui during his keynote speech at Fintech Week, an annual industry gathering that showcases the city's commitment to financial technology. Per Bloomberg, Hui emphasized that Hong Kong intends to address both the risks and potential of AI through a "dual-track" approach that encourages innovation while safeguarding industry standards. In this vein, regulators across Hong Kong's financial spectrum -- from banking and securities to pensions and insurance -- will issue sector-specific guidance to ensure consistent AI governance across all domains of the financial industry, Hui said. This coordinated approach is expected to foster greater clarity and confidence in AI-driven financial applications, enhancing Hong Kong's standing as a leader in financial technology within Asia. Hong Kong's initiative arrives at a time when nations and industries worldwide are grappling with the disruptive power of AI. Governments are increasingly pressed to balance the benefits of AI, including operational efficiencies and customer insights, against concerns around data security and ethical use. For Hong Kong, these efforts are further complicated by the city's strategic positioning amid an intensifying tech competition between the United States and China. The planned tax break on digital assets forms another pillar of Hong Kong's strategy to regain investor trust, particularly those who may have been wary of Hong Kong's market volatility amid ongoing geopolitical tensions. As governments across Asia and beyond explore crypto regulations, the city's proposed tax incentives could make Hong Kong a more attractive destination for digital asset holders and fintech innovators alike. Bloomberg reported that the AI policy and proposed tax measures represent Hong Kong's ambition to reassert its relevance on the global financial stage, as officials work to capture the attention of forward-looking investors. By embracing advancements in both AI and digital assets, Hong Kong hopes to carve out a unique competitive edge, positioning itself as the region's nexus for financial innovation and investment.

Hong Kong Unveils AI Policy for Finance, Floats Tax Breaks for Crypto

On Monday, government officials touted a common framework through which different regulatory agencies can craft policy governing the use of AI, considered key to the future of finance and other sectors. They also proposed the extension of a tax break on the ownership of digital assets such as cryptocurrencies, promising legislation by the end of the year.

Hong Kong issues dual-track policy for AI adoption in finance

The Hong Kong Financial Services and Treasury Bureau (FSTB) has issued policies for the financial services industry focusing on efficiency, security and customer service improvements to ensure the responsible use of artificial intelligence. On Oct. 28, the FSTB -- the Hong Kong government agency dedicated to building and enforcing policies on finance and treasury -- revealed its policy stance on AI adoption in finance. The FSTB said that Hong Kong's financial services industry is most receptive to deploying AI into their businesses. The Hong Kong regulator recommended a "dual-track approach" for its financial services industry to foster AI development while addressing potential challenges. Calls for a regulatory team effort The government intends to collaborate with financial regulators and service providers to facilitate responsible AI adoption. The report explained: "After all, it (AI adoption) is a balancing act - capturing opportunities and mitigating risks." The FSTB's policy statement highlighted six opportunities from next-gen AI applications, which include research and data analysis, building investment strategies, enhanced customer service, automated risk assessment, crime detection and prevention and workflow automation. Current use of AI in Hong Kong includes banking, securities, insurance, accounting, pension fund management and green initiatives. Hong Kong will create a supervisory framework to mitigate various risks accompanied by AI adoption, which include job displacement, intellectual property rights protection and protection for all stakeholders. Hong Kong SFC to soon clarify AI-related obligations Additionally, the Securities and Futures Commission (SFC) of Hong Kong will issue a circular in November detailing the rules, regulations and risks associated with AI adoption. Related: Hong Kong to license more crypto exchanges by end of year In September, the Hong Kong SFC sought the opinions of stakeholders on introducing a new licensing regime for cryptocurrency over-the-counter (OTC) services. According to a South China Morning Post report, the SFC and the Customs and Excise Department (C&ED) will supervise the companies offering crypto OTC trading, a service that allows Hong Kong users to buy and sell cryptocurrencies privately. The planned regulations and licensing for crypto OTC services in Hong Kong were initially to be handled exclusively by the C&ED under a proposal made public in February.