Hong Kong has proposed exempting private equity funds, hedge funds, and family investment vehicles from taxes on cryptocurrency gains, private credit, and other assets, according to a 20-page document reviewed by the Financial Times. The proposal is part of the city’s efforts to strengthen its position as a leading offshore financial hub.

The government emphasized the importance of taxation in attracting asset managers and expressed its intention to create a “conducive environment” for investment. 

Alongside cryptocurrencies, the proposal seeks to include overseas property and carbon credits in the tax-exempt category. A six-week consultation period will follow the proposal's release.

The initiative highlights Hong Kong’s bid to rival Singapore, which has attracted significant investment through its tax-friendly fund structures. Hong Kong’s open-ended fund company model has seen over 450 launches to date, while Singapore, with its variable capital company structure introduced in 2020, has surpassed 1,000 fund launches.

Industry experts say the proposed exemptions could provide clarity for investors. Patrick Yip, vice chair and international tax partner at Deloitte China, said the move could boost confidence among family offices, some of which already allocate up to 20% of their portfolios to digital assets.

The proposal comes amid intensified competition between Hong Kong and Singapore. While Singapore has traditionally led in fund launches, stricter anti-money laundering checks have slowed the establishment of family offices. Hong Kong seeks to capitalize on this by offering more investor-friendly policies.

As Beijing tightens control over wealth displays, affluent Chinese individuals are increasingly setting up private investment vehicles abroad. Hong Kong’s latest proposal may attract a share of this activity, especially as UBS Chief Executive Sergio Ermotti recently noted the city’s progress as a wealth management hub alongside Singapore.