Written by: Xie Yancen

On February 24, 2026, the Hong Kong Securities and Futures Commission approved two RWA tokenization projects on the same day, indicating that the development of digital assets in Hong Kong has officially entered a new stage.

The first approved project is the Delin Tower real estate RWA project (see our previous analysis report "Exclusive Breakdown of Hong Kong's First Real Estate RWA: The Tax Compliance Code Under the LPF Structure"). As Hong Kong's first RWA case in traditional commercial real estate, it uses Delin Tower located at 92-96 Wellington Street, Central, Hong Kong as the underlying asset and adopts a "LPF (Limited Partnership Fund) + Tokenization" dual-layer structure, focusing on digitizing the fund equity that holds the property. Technically, the project issues tokens using the HashKey Chain blockchain protocol in parallel with the XRP ledger, supported by Asseto Fintech; Delin Digital Family Office (holding a Type 9 license) serves as the investment manager, while Delin Securities (holding a Type 1 license) is responsible for distribution. This project not only validates the feasibility of the "offshore asset offshore issuance" model but also provides a replicable and referenceable compliance template for the integration of traditional commercial real estate and digital finance.

Approved simultaneously with the Delin Tower project is the Animoca Brands equity fund RWA project—this is also Hong Kong's first compliant landing case of the tokenization of private equity fund rights. Both projects share the same compliance framework, licensed entities, and technical solutions, with the core difference lying in the underlying assets: one is a physical property, while the other is a star investment target in the Web3 field. If the Delin Tower project has paved the way for the digitization of traditional hard assets, then the Animoca Brands project opens a new avenue for addressing the liquidity challenges of private equity investment.

Below is a complete analysis of the Animoca Brands equity fund RWA project:

I. Core Information of the Project

This project was approved concurrently with the Delin Tower real estate RWA project and is Hong Kong's first compliant landing case for the tokenization of private equity fund rights, initiated by Delin Holdings (01709.HK), receiving a "No Objection Letter" from the Hong Kong Securities and Futures Commission on February 24, 2026, officially launching. The core information is as follows:

(1) Underlying Assets and Structural Design

Underlying asset: The core is the equity of a limited partnership fund (LPF) that holds Animoca Brands' private equity investments. Animoca Brands is a unicorn company in Hong Kong's Web3 and gaming investment sector, owning several well-known blockchain gaming projects and NFT IPs that are highly recognized in the market.

Core structure: It also adopts a "LPF (Limited Partnership Fund) + Tokenization" dual structure, simply put, it transforms the "LPF fund equity holding Animoca Brands' shares" into tokens through digital means. This is Hong Kong's first approved tokenization project of private equity fund rights, which also signifies substantial recognition from the Hong Kong Securities and Futures Commission of the tokenization of fund rights invested in private equity.

Technical solution: Tokens are issued based on the XRP ledger (XRPL), with technical support from Asseto Fintech, and this project was also selected for the Hong Kong Cyberport "Blockchain and Digital Assets Pilot Subsidy Scheme," equivalent to gaining official endorsement.

(2) Regulatory Approval and Compliance Basis

Approval form: The Hong Kong Securities and Futures Commission issued a "No Objection Letter" on February 24, 2026, approving it simultaneously with the Delin Tower project, indicating a "non-objection" stance from regulators regarding such business plans and reflecting Hong Kong's regulatory flexibility in the RWA field.

Regulatory principles: Following the penetration regulatory logic of "same business, same risks, same rules"—the essence of a token is the digitization of LPF fund equity, so it still falls under the regulatory scope of the Securities and Futures Ordinance, maintaining consistency with traditional securities regulatory standards.

Licensing requirements: First, the Delin Digital Family Office holds a Type 9 (Asset Management) license and acts as the investment manager of the project, mainly responsible for tokenizing fund equity using blockchain technology; Second, Delin Securities holds a Type 1 (Securities Trading) license and serves as the distributor of the RWA tokens, specifically distributing tokenized rights to qualified professional investors.

Approval period: Delin Holdings first disclosed the project plan in October 2025 and obtained approval in February 2026, taking about 4 months overall, showcasing the prudence of Hong Kong's regulatory approach while reflecting its support efficiency for RWA innovations.

(3) Project Positioning and Industry Significance

Core value: It addresses the long-standing liquidity pain points of private equity shares. Traditional private equity share transfers rely entirely on offline negotiations and manual settlements, often taking several months for a single transaction; However, through tokenization technology, rights transfer becomes a programmable, traceable, and verifiable digital process, significantly improving efficiency.

Asset selection logic: The selection specifically avoids traditional assets, focusing on high-growth Web3/game tracks, choosing Animoca Brands as a well-known target, along with the characteristics of private equity assets, providing a reusable template for future larger-scale compliant transfers of private equity rights.

Industry significance: Firstly, it fills the gap of tokenization exploration in Hong Kong—prior to this, Hong Kong's tokenization projects mainly concentrated on financial products and real estate, with private equity types landing for the first time; secondly, it validates the compliant path for private equity RWAs, streamlining the entire process of digitalization of non-standard assets, allowing more private equity assets to have the potential for digital circulation; thirdly, being selected for the Hong Kong Cyberport grant plan and gaining official endorsement can also drive more institutions to participate in the private equity RWA field.

II. Analysis of Project Tax Issues

(1) Core Tax Principles: Penetration Regulation, Tax Based on Underlying Assets

According to the letter issued by the Hong Kong Securities and Futures Commission on November 2, 2023, regarding intermediaries engaging in tokenized securities related activities, tokenized securities are essentially "traditional securities with tokenized packaging," and are still defined as "securities" under the Securities and Futures Ordinance. At the same time, the Commission also clarifies the regulatory principle of "same business, same risks, same rules" and the "penetration method"—simply put, skip the tokenized packaging and regulate directly according to the nature of the underlying traditional securities.

Applied to this project, tax treatment also follows this penetration logic: not taxing the "token" itself but penetrating to the underlying LPF fund and Animoca Brands equity investment, applicable to Hong Kong's Tax Ordinance and relevant tax rules for funds, with the token being merely a technical carrier for rights transfer that does not increase tax categories.

(2) Specific Tax Treatment for Each Participant

1. Project Initiator: Delin Holdings

During the establishment phase of the LPF fund: Delin Holdings injects its holdings of Animoca Brands shares into the LPF fund; if this is just an internal equity restructuring, it is regarded as a "non-transaction asset injection" that does not generate actual profits, thus does not need to pay profits tax; however, if the process involves asset transfer premiums, that premium must be taxed at a rate of 16.5% under the Hong Kong Corporate Profits Tax (according to Article 14 of the Tax Ordinance).

During the token issuance phase: The financing by issuing tokens through the LPF fund is essentially the sale of fund shares. Delin Holdings, as the fund initiator, earns management fees and profit shares from it; if generated in Hong Kong, they must be included in the company's revenue and taxed at 16.5% (according to Article 14 of the Tax Ordinance).

During the fund revenue phase: The appreciation profits generated by the Animoca Brands equity investment ultimately belong to the LPF fund. Delin Holdings, as a fund partner, receives fund revenues according to the partnership ratio; if they are capital gains (from long-term holding, not from frequent trading), no tax is due; if they are operational profits, they must be included in corporate profits for profits tax (according to Article 14 of the Tax Ordinance).

2. Fund Manager: Delin Digital Family Office

The Delin Digital Family Office holds a Type 9 Asset Management license and acts as the investment manager of the LPF fund in this project, likely also as the general partner (GP) or its appointed management entity. It obtains income from the LPF fund mainly in two parts, with different tax treatments:

Routine management fees: This income is classified as business revenue from providing asset management services in Hong Kong, without special tax benefits, taxed at 16.5% corporate profits tax (according to Article 14 of the Tax Ordinance).

Performance fees (contingent rights): According to the "2021 Taxation (Amendment) (Contingent Rights Taxation Relief) Ordinance" (2021 No. 15), this part of the fee can enjoy a 0% profits tax benefit if the following conditions are met:

If these conditions are not met, performance fees will be taxed at 16.5%, the same as routine management fees.

Investment management entity (i.e., Delin Digital Family Office) acquires contingent rights from a certified investment fund;

The entity conducts core revenue-generating activities in Hong Kong and meets substantial activity requirements: employs at least 2 qualified full-time employees and incurs at least HKD 2 million in operating expenses annually in Hong Kong;

Contingent rights derive from transactions that meet regulations (according to Schedules 16C and 16D of the Tax Ordinance).

3. Token Investors (Qualified Investors)

Hong Kong does not have capital gains tax, so the tax treatment for investors primarily depends on the nature of the token transactions—whether for long-term investment or frequent trading.

Token purchase/sale/transfer phase: If this is a long-term investment, holding tokens to obtain fund appreciation income, not frequent trading for arbitrage, then the profits from the token transfer are considered capital gains, and Hong Kong does not levy capital gains tax, so no tax is due (according to Article 14 of the Tax Ordinance, only "business profits" are taxable); however, if it involves frequent transactions aimed at arbitrage, the profits will be regarded as business profits, with individual investors taxed at 15% and corporate investors at 16.5% for profits tax (according to Article 14 of the Tax Ordinance).

Token dividend phase: The token dividends received by investors are essentially profit distributions from the LPF fund. Hong Kong implements a single-layer tax system; as long as profits tax has been paid at the fund level, investors do not need to pay tax again—according to Article 26 of the Hong Kong Tax Ordinance, dividends and fund distributions are not included in assessable profits, so investors do not need to pay tax again.

Inheritance/gift phase: Hong Kong abolished estate tax as early as 2005 with the "Estate Tax (Abolition) Ordinance" and has no gift tax, so investors transferring tokens to others or inheriting them bear no tax obligations.

4. Token Trading/Distribution Party: Delin Securities

As a licensed securities trading entity, commissions and fees earned from distributing RWA tokens by Delin Securities are classified as business revenue generated in Hong Kong, taxed at 16.5% corporate profits tax (according to Article 14 of the Tax Ordinance).

5. Underlying Assets: Animoca Brands Equity Investment Tax

During the period when the LPF fund holds the Animoca Brands equity investment, the nature of the income differs, and tax treatment varies:

Dividend income: If Animoca Brands distributes dividends to the LPF fund, according to Article 26 of the Hong Kong Tax Ordinance, dividend income does not require profits tax in Hong Kong—as Hong Kong does not tax dividends.

Capital appreciation on equity disposal: If the LPF fund later sells its Animoca Brands shares and generates appreciation profits, this income is capital in nature and can enjoy the exemption under the unified fund tax exemption system (see details below).

No property tax/rates: Unlike the Delin Tower real estate project, this project’s underlying asset is equity investment, which does not involve property-related taxes such as property tax or rates, leading to simpler tax treatment.

(3) Hong Kong Tax Incentives Applicable to the Project

1. Token Transaction Phase: No Stamp Duty

According to the Hong Kong "2023 Stamp Duty (Amendment) Ordinance" and the Securities and Futures Commission's circular on intermediaries engaging in tokenized securities related activities, it is expressly stated that trading and transferring tokenized financial products (like tokenized fund shares) on licensed virtual asset trading platforms (VATPs) does not qualify as "Hong Kong securities" under Schedule 1, Class 1 of the Stamp Duty Ordinance, thus exempting them from stamp duty. The tokens of this project being the digitized equity of the LPF fund are considered tokenized financial products; therefore, whether investors buy/sell tokens or platforms distribute tokens, no stamp duty is payable.

2. At the LPF Fund Level: Unified Fund Tax Exemption System Applicable

According to Article 20AN of the Hong Kong Tax Ordinance and Schedule 16C, under the unified fund tax exemption system: "Any fund (regardless of its structure, central management and control location, size, or purpose) can be exempt from profits tax on earnings obtained from qualifying transactions." This tax exemption system applies to privately offered funds and has been expanded to include digital asset investments. According to the "2025 Taxation (Amendment) (Fund Contingent Tax Rights and Other Tax Relief) Ordinance," starting from the 2025/26 tax year, the unified fund tax exemption system is applicable to privately offered funds that include digital assets.

If the LPF fund of this project meets the definition of a "private fund," then its earnings from qualifying transactions (including appreciation profits from selling Animoca Brands shares) can enjoy direct exemption from profits tax.

3. New Tax System Optimization Policy of 2026: Digital Assets Included in Tax Exemption Scope

In March 2026, the Hong Kong Financial Services and Treasury Bureau announced further optimization of the fund tax system, explicitly incorporating digital assets into the category of "qualified investments" (revised Schedule 16C of the Tax Ordinance). This means:

The Animoca Brands equity investment held by the LPF fund (though in traditional equity form) can exempt the turnover profits from its tokenized rights at the fund level;

If the fund directly holds digital assets in the future, it can also apply for this tax exemption policy.

4. Contingent Rights Tax Relief

According to the "2021 Taxation (Amendment) (Contingent Rights Tax Relief) Ordinance" (2021 No. 15) and Schedule 16D of the Tax Ordinance: "Contingent rights obtained by qualified persons (i.e., investment management entities) are subject to a 0% profits tax rate." Additionally, according to the FAQ explanations from the Hong Kong Taxation Department: Contingent rights obtained by qualified employees from qualified persons can be entirely excluded from assessable income, meaning they are exempt from salaries tax; "qualified employees" refer to those employed by qualified persons or their affiliated companies and who actually provide investment management services in Hong Kong.

In simple terms, as the GP, Delin Digital Family Office can utilize 0% profits tax benefits for the contingent rights obtained from the fund as long as it meets the aforementioned conditions and substantial activity requirements (2 full-time employees + HKD 2 million annual local operating expenses).

5. No Other Indirect Taxes

Currently, Hong Kong does not impose value-added tax, consumption tax, capital gains tax, or withholding tax, so steps such as custody, trading, and settlement of tokens only need to be taxed according to traditional financial business practices without adding any additional tax categories.

(4) Potential Tax Risks and Considerations for the Project

1. Tax Determination Risks in Private Equity Valuation

Valuations of private equity assets (such as Animoca Brands shares) can fluctuate significantly and lack public market quotes, which may attract attention from the Hong Kong Taxation Department:

Whether the net asset value calculation of fund shares is fair;

Whether the pricing of the token issuance aligns with the valuation of the underlying assets;

Determination of the nature of profits at the time of investor exit—whether they are capital gains or operational profits.

It is recommended that funds hire independent third-party valuation firms to regularly issue valuation reports and maintain complete valuation evidence to avoid disputes in tax determinations later on.

2. Tax Information Reporting Risks for Cross-Border Investors

Hong Kong is currently advancing a crypto asset reporting framework (CARF), set to begin collecting digital asset trading information in 2027 and automatically exchange information with cooperating jurisdictions in 2028. If cross-border investors hold tokens in this project, their trading information will be reported to tax authorities in their resident countries, necessitating investors to pay attention to their resident country’s global taxation rules (like those in the United States or the EU) to avoid double taxation situations.

3. Tax Determination Risks of Transaction Nature

The Hong Kong Taxation Department does not have clear quantifiable standards for determining "capital gains" and "business profits," primarily looking at transaction frequency, holding purpose, and transaction mode. If investors frequently buy and sell tokens, they may be classified by the tax department as "operational transactions," requiring them to pay additional profits tax. It is advised that investors maintain proper transaction records to demonstrate their holding purpose is long-term investment rather than short-term arbitrage.

4. Cross-Border Tax Risks for Mainland Investors

Mainland China has strict regulations on virtual currency-related activities. If mainland investors participate in this project, two points require close attention:

The arrangement to avoid double taxation between Mainland China and Hong Kong: If the Hong Kong fund has already paid profits tax, mainland investors can deduct this with a proof of tax payment against corporate income tax or personal income tax in Mainland China;

Mainland capital project controls: Mainland investors engaging in foreign currency transactions must comply with foreign exchange regulations, or they may face risks of violating foreign exchange laws.

5. Compliance Risks for Applicable Tax Incentive Conditions

The unified fund tax exemption system and contingent rights tax relief come with strict substantial activity requirements. According to documents from the Hong Kong Legislative Council, qualified persons must employ at least 2 qualified full-time employees, incur at least HKD 2 million in annual operating expenses in Hong Kong, and conduct core revenue-generating activities in Hong Kong.

The project operators need to ensure that the LPF fund and GP continuously meet these compliance conditions, or they might lose their tax advantages, leading to an increased tax burden.

III. Conclusion

The Animoca Brands equity fund RWA project is Hong Kong's first approved private equity RWA tokenization project, receiving regulatory clearance concurrently with the Delin Tower real estate RWA project, marking the expansion of Hong Kong's RWA exploration from the real estate sector to private equity.

(1) Core Points of Tax Treatment (According to Hong Kong's Tax Ordinance and Subsidiary Legislation)

(2) Core Advantages of the Project

Asset side: Animoca Brands, as a leading investment institution in the Web3 field, has underlying assets with high growth potential and market recognition, demonstrating outstanding investment value;

Liquidity side: Upgrading private equity shares from low-frequency offline transactions to programmable digital assets significantly enhances asset liquidity, addressing the core pain points of private equity;

Tax side: It combines three layers of tax advantages—tax exemption for the LPF fund, zero stamp duty on token transactions, and 0% profits tax on GP contingent rights, resulting in a clear advantage in overall tax burden.

(3) Comparison with the Delin Tower Project

Delin Tower: As a real estate RWA, it will involve property tax, rates, and other real estate-specific taxes, with underlying assets mainly being rental income and appreciation profits from physical properties;

Animoca Brands: As an equity-type RWA, it does not involve any property-related taxes, with underlying assets being appreciation profits from equity investments, allowing it to purely enjoy the benefits of the fund tax exemption system.

This project also establishes a tax model for future private equity RWA projects: adopting a LPF fund structure to handle underlying equity assets, enjoying applicable tax benefits related to Hong Kong funds, and utilizing tokenization technology to enhance asset liquidity, while tokenization itself does not alter the tax attributes of the underlying assets.

Note: This analysis is based on Hong Kong's tax laws and regulatory policies as of March 2026, including the Tax Ordinance (Chapter 112), Stamp Duty Ordinance (Chapter 117), Securities and Futures Ordinance (Chapter 571), related amendment ordinances, subsidiary legislation, interpretations and practice notes from the Tax Department, and SFC circulars. Hong Kong is continuously advancing legislation related to digital assets and RWAs, and project participants are advised to monitor policy dynamics and consult professional tax advisors for specific compliance planning.

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