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• Create Date 5 十二月, 2018
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Taxation of Initial Coin Offerings – View from Hong Kong

The application of blockchain technology has brought a myriad of solutions for business, the increase in the value of Bitcoin over 2017 and early 2018 being just one indicator of the uptake of the technology. The increase in the price of Bitcoin and other cryptocurrencies (or “crypto”) and the search for alternative asset classes over this period have brought with them a spate of issuances by start-up technology groups of their own forms of cryptocurrencies by way of initial coin offerings (“ICOs”). This has in turn brought about substantial windfalls to the groups undertaking ICOs. With its recognisable corporations law and established capital markets, Hong Kong has at times found itself as a jurisdiction through which groups have sought to raise funds through ICOs. However, in the chase for free money, the analysis of the taxation treatment of tokens may have been put aside on occasion, largely due to the absence, as in other jurisdictions, of legislative provisions or Inland Revenue Department (IRD) guidance. In the hangover from the recent downturn in crypto asset values, Hong Kong ICO issuers may now be focusing on how these transactions should be accounted. This article proposes a framework drawing from first principles through which crypto assets comprising utility tokens may be viewed and from which a profits tax filing basis may be adopted.