SFPA Advocates Wider Data Collection And Balanced Penalty Framework In Hong Kong’s Crypto-Asset Reporting Overhaul
In Brief
Hong Kong SFPA supports client data collection, streamlined registration, automated reporting, and a balanced penalty framework to ensure practical compliance with CARF and CRS while protecting privacy and reducing operational burdens.
Hong Kong Securities and Futures Professionals Association (SFPA) submitted a detailed response to the government’s consultation on the implementation of the Crypto-Asset Reporting Framework (CARF) and proposed amendments to the Common Reporting Standard (CRS) in Hong Kong, offering industry insights and recommendations aimed at balancing regulatory compliance, operational practicality, and data privacy.
In its response, the SFPA emphasized broad support for a “wider approach” to client data collection. Rather than segregating clients into “reportable” and “non-reportable” categories at onboarding, the association advocates collecting information from all clients to reduce ongoing monitoring burdens and avoid administrative friction if clients move between jurisdictions. The association also stressed the importance of explicit legal protections under Hong Kong’s Personal Data (Privacy) Ordinance when collecting information on non-reportable persons for anticipated future compliance.
On record-keeping, the SFPA largely agrees with the proposed six-year retention period but raised concerns about obligations on individuals following the dissolution of entities. It suggested that designated third-party custodians, such as liquidators or licensed corporate service providers, should assume responsibility for maintaining records, instead of imposing indefinite personal liability on former directors or officers.
Streamlined Registration, Automated Reporting, And Graduated Penalties For Hong Kong Institutions
The association also endorsed mandatory registration for all Reporting Crypto-Asset Service Providers (RCASPs) and Reporting Financial Institutions (RFIs) while recommending simplified processes for entities expected to file “Nil Returns,” reducing administrative overhead without compromising regulatory oversight. The SFPA highlighted the need for a graduated penalty framework, cautioning against “per account” fines for minor technical errors and suggesting caps and reasonable defenses for unintentional mistakes.
The consultation response also addressed technical and operational issues. The SFPA called for electronic filing via API integration in addition to XML uploads, particularly for large institutions, to automate reporting and reduce operational risks. It highlighted that self-developed software and IRD-provided data preparation tools should be robust and user-friendly, allowing smaller institutions to comply effectively.
Additionally, the SFPA supported the default treatment for reporting gross proceeds under both CRS and CARF, noting that optional treatment would introduce unnecessary reconciliation complexity. Aligning with global standards would simplify reporting for Hong Kong-based institutions operating across multiple jurisdictions.
Regarding the enhanced penalty framework for CRS, the association recommended a “soft landing” period during the initial implementation, allowing warning letters for first-time administrative oversights. It also urged the codification of a “reasonable excuse” defense when RFIs relied on valid self-certifications and conducted standard due diligence.
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About The Author
Alisa, a dedicated journalist at the MPost, specializes in crypto, AI, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
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Alisa, a dedicated journalist at the MPost, specializes in crypto, AI, investments, and the expansive realm of Web3. With a keen eye for emerging trends and technologies, she delivers comprehensive coverage to inform and engage readers in the ever-evolving landscape of digital finance.
