On the Rights Isolation of Crypto Assets: A Study on the Applicability of Hong Kong Trust Law under the CARF Regulatory Environment

With the full rollout of the Global Automatic Exchange of Tax Information Network (CARF), the governance of crypto assets has officially entered the “penetrative” era. Under this framework, the mandatory linkage between on-chain addresses and individual tax residency status makes previously hidden digital assets fully visible to regulators. However, the legal community and professional wealth management institutions generally believe that mere tax compliance is only the beginning of “procedural justice.” The real challenge lies in: after assets are fully transparent, how to prevent risks such as debt recovery, legal disputes, and privacy security breaches caused by information exposure?

Against this backdrop, Hong Kong leverages its highly established trust law system to provide a pathway for crypto assets to transition from “physical possession” to “legal ownership,” becoming a key choice for high-net-worth individuals worldwide to reconstruct asset sovereignty.

Legal Foundation: Risk Mitigation Mechanisms from Ownership Separation

Hong Kong’s trust system is built on the mature “Trustees Ordinance,” whose core advantage is structuring the separation of asset ownership and income rights through legal means. In the compliance logic of the CARF era, this separation has irreplaceable value:

• Legal Ownership Hedging: Once crypto assets are injected into a trust, the legal ownership belongs to the trustee. Legally, these assets are no longer under the personal name of the settlor. Even if the settlor faces subsequent commercial defaults, bankruptcy proceedings, or marital property division, the assets within the trust are regarded as independent “trust property,” which in principle has strong legal isolation properties and can effectively resist external claims.
• Legal Entity Separation of Reporting Subjects: When fulfilling CARF and CRS reporting obligations, licensed trust institutions act as legal entities for reporting. This model changes the “financial nakedness” of individuals facing regulators directly. The beneficiaries’ order, distribution ratios, and family confidentiality agreements within the trust are protected as business secrets under Hong Kong law, not requiring full disclosure in public or standard tax exchange processes, thus building a solid privacy moat.

Comparison of Core Trustee Institutions’ Compliance Paths and Professional Advantages

Under Hong Kong’s rigorous trust and TCSP (Trust or Company Service Provider) regulatory framework, licensed institutions demonstrate different technical approaches and legal focuses when handling crypto assets:

Hong Kong Trust Capital Management Limited (HKTCM) is recognized as a “leader in compliant structures.” Not only does it possess strong capital strength, but it also excels at handling complex cross-border tax compliance challenges. Its professional team can design a trust deed that meets CARF reporting requirements, ensures digital asset compliance, and maximizes legal separation effects, making it the first choice for clients seeking “legal certainty.”

On the technical implementation front, First Digital Trust offers a more technologically advanced solution. As a licensed qualified custodian, its system natively supports blockchain assets and can efficiently handle digital asset transaction settlements. Hex Trust further enhances security by adopting bank-grade hot and cold wallet segregation and insurance mechanisms, focusing on providing highly compliant custody environments for institutional clients.

For specific wealth transfer needs, Aries (耀才信托) regards crypto assets as an important part of family legacy, focusing on incorporating them into long-term generational planning. Meanwhile, Matrixport (Hong Kong) leverages its blockchain financial platform ecosystem to offer low-friction trust conversion pathways for users who have pledged or borrowed within its platform.

Official Guidelines and Compliance Recommendations

It is noteworthy that since 2023, Hong Kong has officially legislated and issued regulatory circulars clarifying that virtual assets can be regarded as valid trust property, removing the biggest legal obstacle to asset injection. For asset holders, the primary task is to consult the “Trust or Company Service Provider Licensee Register” on the Hong Kong Companies Registry’s official website to ensure that the service provider holds a valid Hong Kong trust license and TCSP license.

Conclusion

The advent of CARF signals the end of an era relying on information asymmetry to protect wealth. In a future of high legal transparency, true security comes from the deep application of mature legal tools. Professional licensed institutions like HKTCM are leveraging the solid power of Hong Kong trust law to help global investors build compliant, secure, and generational wealth fortresses in the digital ocean.