Can encryption assets help Hong Kong immigrants? In-depth thinking behind the policy

Recently, the Hong Kong Investment Promotion Agency approved an investment immigration application using 30 million HKD worth of Ethereum as proof of assets, which has attracted widespread attention in the cryptocurrency circle. For individuals holding a significant amount of encryption assets, this undoubtedly lowers the threshold for immigrating to Hong Kong. However, is the process of investment immigration really as simple as it seems? Has Hong Kong truly become an ideal place for cryptocurrency holders? The answers to these questions may vary from person to person.

In fact, this policy is part of the new Capital Investment Entrant Scheme (CIES) launched by the Hong Kong government in 2023. The scheme aims to attract external investors and capital, further consolidating Hong Kong's position as an international asset and wealth management center.

According to CIES, qualified investors can obtain a stay visa after investing 30 million HKD in licensed assets in Hong Kong. After residing for 7 years, there is an opportunity to apply for permanent resident status in Hong Kong. Although the policy seems straightforward, there are still many details to pay attention to in actual operation.

First, the applicant must bear the cost of hiring a Hong Kong professional accountant to issue a verification certificate proving that they have a net asset of 30 million Hong Kong dollars. In this step, the location and composition of the assets are not restricted; it only needs to be proven that the applicant beneficially owns net assets or net capital with a market value of no less than 30 million Hong Kong dollars within six months prior to the date of submitting the net asset review application.

Secondly, applicants need to invest no less than 30 million Hong Kong dollars in designated permitted investment asset categories within 6 months prior to submitting the application or within 6 months after approval. These assets include financial assets such as stocks of companies listed on the Hong Kong Stock Exchange, debt securities, certificates of deposit, subordinated bonds, as well as qualified collective investment schemes, private limited partnership funds, and non-residential real estate.

In addition, applicants need to invest 3 million HKD in the "Capital Investor Immigration Program Investment Portfolio," which was established by Hong Kong Investment Management Company to support key industries that contribute to the long-term development of Hong Kong, including innovation technology.

After completing the investment, the Hong Kong Immigration Department will issue a 2-year stay visa, which needs to be renewed subsequently. Every year, applicants must provide a capital verification report from a professional accountant to prove that the total investment amount is still not less than 30 million HKD. It is worth noting that this total amount is unrelated to investment losses; it only needs to prove that the investment scale meets the requirements at the time of application.

In this process, the participation of cryptocurrencies mainly focuses on the initial capital verification stage. Mainstream cryptocurrencies such as Bitcoin and Ethereum can be used for asset identification and can be proven through cold wallets or leading trading platforms. However, whether other cryptocurrencies are applicable still requires specific analysis, and usually only those with relatively stable values, large circulation, and legal status in Hong Kong are likely to be accepted.

For cryptocurrency holders, the biggest challenge is not proving the value of their assets, but rather proving the source of their funds. Relevant institutions and accountants often require clients to provide proof of the source of their funds, including information about the original source of funds used to purchase cryptocurrencies and the places of purchase. Given the volatility and anonymity of the cryptocurrency market, this requirement can pose difficulties for many investors.

Nevertheless, Hong Kong's investment immigration program's acceptance of cryptocurrency as proof of assets for the first time reflects its open attitude towards the emerging financial sector. This not only increases the use cases for cryptocurrency but also has the potential to further enhance Hong Kong's position in the global encryption ecosystem, attracting more talent and capital, and promoting the development of the local Web3 industry.

In fact, Hong Kong has introduced a series of measures in recent years to attract foreign talent, including optimizing the existing talent admission scheme and launching a new high-skilled talent scheme. The aim of these initiatives is to diversify talent recruitment and enhance Hong Kong's talent pool to address the challenges of population loss in recent years.

From the current situation, these introduction plans have already achieved certain results. In 2024, nearly 140,000 various talent immigration plan visas have been successfully approved, an increase of 4,000 from the previous year. As of early January 2024, the "New Capital Investor Immigration Program" has received over 750 applications, with a projected total investment amount exceeding HKD 22 billion.

However, it is worth noting that currently only 2 applicants are involved in the use of encryption assets. This may reflect that holders of encryption assets have not yet fully recognized this policy, or that there are certain difficulties in proving the source of funds.

Nevertheless, Hong Kong's emphasis on the Web3 sector has not diminished but rather increased. Over the past year, Hong Kong has balanced regulation and inclusivity in the realm of virtual assets, achieving significant progress in product innovation, platform licensing, and regulatory framework extension. For instance, Hong Kong has approved the issuance of multiple virtual asset spot ETFs, promoting the compliance and productization development of virtual assets.

In terms of exchanges, Hong Kong has approved 9 virtual asset trading platforms, over 31 brokerages have upgraded to virtual asset license type 1, and over 36 asset management firms have upgraded to virtual asset license type 9. In the payment sector, the Hong Kong Monetary Authority is exploring the combination of RWA and CBDC, and continuously improving relevant regulatory provisions.

However, from the perspective of market size and cost, Hong Kong's influence in the global Web3 development remains limited. Compared to the United States' over $111.78 billion in Bitcoin ETF net assets, Hong Kong's scale is vastly different. Some encryption practitioners even believe that Hong Kong's investment immigration policy is overpriced and not as cost-effective as places like Singapore, Australia, or Dubai.

Nevertheless, Hong Kong's strategic positioning is not to seize market share in the encryption market, but to build a new decentralized financial system based on traditional finance, filling the gaps in virtual assets. Hong Kong aims to prepare for the future era of digital asset trading while consolidating its position as a traditional financial center. This also explains why Hong Kong focuses on areas such as stablecoins and RWA while regulating virtual asset trading platforms.

Overall, although Hong Kong may not be the most active region for cryptocurrencies, its "small government, big market" characteristic implies safety and stability. For traditional capital, this safety may be more important than other factors. With the continuous improvement of policies and the gradual maturation of the market, Hong Kong's position in the global encryption ecosystem is expected to further enhance.