The market remains sluggish, and Hong Kong, which has been neglected for a long time, has also attracted new attention.
On February 8, Hong Kong certified public accountant Clementsiu disclosed on social media that the Hong Kong Investment Promotion Agency approved an investment immigration application using Ethereum as proof of assets of HK$30 million. He also stated that in October last year, he had successfully handled the first investment immigration case in Hong Kong using Bitcoin as proof of assets.
It may sound unremarkable at first glance, but for crypto holders, especially large Chinese holders, the threshold for overseas immigration is significantly lowered. After all, 30 million Hong Kong dollars is not a huge fortune in the crypto circle where the rich are eager to move, and moving to Hong Kong is a natural direction for the Chinese.
But is investment immigration so simple? Is Hong Kong really a crypto utopia? Different people have different answers. In fact, regardless of whether it includes cryptocurrencies, the investment immigration policy belongs to the new Capital Investor Entry Scheme (CIES) proposed by the Hong Kong government in 2023. The scheme is open to qualified investors and further strengthens Hong Kong's position as an international asset and wealth management center by introducing external investors and capital.
According to the plan, qualified investors can obtain a stay visa after investing HK$30 million in permitted assets in Hong Kong, and will have the opportunity to apply for Hong Kong permanent residency after living there for 7 years. The plan is not complicated, but when it comes to actual operation, there are still many details that need attention.
First, the applicant needs to hire a professional accountant in Hong Kong at his own expense to issue a capital verification certificate proving that he has a net asset of HK$30 million. At this step, the location of the assets is not restricted, and the composition of the assets is not limited. It is only necessary to prove that the applicant has absolutely beneficially owned net assets or net capital with a net value of not less than HK$30 million during the entire period of 6 months before the date of the net asset review application. It is worth noting that the period was originally two years, and was subsequently further optimized to 6 months by the Hong Kong government.
Of course, it is not enough to have assets. The ultimate goal of the Hong Kong government is to allow assets to flow into Hong Kong. Within 6 months before submitting the application, or within 6 months after approval, the applicant needs to invest no less than 30 million Hong Kong dollars in designated permitted investment asset categories. The Hong Kong government has made very clear regulations on the investable targets: qualified investors need to invest 27 million Hong Kong dollars in financial assets (all types are denominated in Hong Kong dollars/RMB), including stocks, debt securities, certificates of deposit, and subordinated bonds listed on the Hong Kong Stock Exchange; qualified collective investment plans, including funds, real estate trusts, open-end funds and life insurance plans issued by the Securities and Futures Commission's No. 9 license institution; private limited partnership funds registered in Hong Kong; non-residential real estate for commercial or industrial purposes (including uncompleted properties but not land), but the upper limit of this type of investment amount is 10 million Hong Kong dollars.
The remaining HK$3 million is equivalent to a mandatory target and needs to be invested in the "Capital Investor Entrance Scheme Investment Portfolio" established by Hong Kong Investment Management Co., Ltd. The investment portfolio will invest in companies or projects related to Hong Kong to support the innovation and technology industry and other key industries that contribute to the long-term development of Hong Kong's economy. The specific operation is to deposit HK$3 million in a designated account of a financial intermediary, which will be managed by four fund management companies and related service agencies, including Betatron Venture Group, Inno Angel Fund, Concept Capital and Huike Science and Technology Investment. To put it bluntly, this HK$3 million is equivalent to a contribution to Hong Kong Angel Investment. If it makes money, everyone will be happy, and if it loses, there is nothing to say.
After completing the above investment, the Hong Kong Immigration Department will issue a 2-year stay visa, which needs to be renewed later. The renewal is generally in the form of 3+3, but every year the applicant needs to hire a professional accountant to verify the capital report to prove that the total investment is still not less than 30 million Hong Kong dollars, and the assets have not been transferred or used for other purposes. However, the total investment has nothing to do with the previous investment losses. Even if the investment is lost, the current investment amount does not reach 30 million Hong Kong dollars. It is only necessary to prove that the investment scale at the time of application has reached 30 million Hong Kong dollars, and no additional investment is required. The interest or other profits of the investment profit can be freely disposed of. After living for 7 years, you can be replaced as a permanent resident of Hong Kong. At that time, the investment amount will no longer be restricted and the applicant can also dispose of it freely.
The overall process is as above, and the participation of cryptocurrencies this time is concentrated on the initial capital verification stage, that is, cryptocurrencies such as Bitcoin and Ethereum can also be used for asset identification, and encrypted assets can be placed in cold wallets or proved through top transactions such as Binance. It is worth noting that although the existing Bitcoin and Ethereum have been recognized, whether other cryptocurrencies can be used for the proof cannot be generalized. Only currencies with relatively stable value, large circulation, and legal in Hong Kong can be applied.
In addition, whether the subsequent investment of 30 million Hong Kong dollars can be invested in virtual currency ETFs remains to be discussed. According to Xiao Yaohe, deputy managing partner of Hongyuan Accounting Firm Co., Ltd., the possibility is relatively small, but it can be tried to purchase by opening a limited partnership fund. Whether it can be invested directly still needs subsequent verification.
In fact, from the perspective of asset proof alone, there have long been precedents of using cryptocurrency as asset proof in the United States, Singapore and other places. However, for cryptocurrency holders, the most difficult thing is never to take out the money, but where does the money come from? When using cryptocurrency as asset proof, relevant institutions and accountants will require customers to submit proof of the source of funds.
Proof usually involves the original source of funds for the purchase of cryptocurrency and the place and low point of the purchase of crypto assets. Obviously, for a field like cryptocurrencies with huge ups and downs and unclear anonymity, the above questions are undoubtedly extremely difficult to answer. And this is the real difficulty of crypto asset immigration. The historical burden is heavy, and the holder must leave traces of everything to solve it.
In any case, the first use of cryptocurrency by Hong Kong investment immigrants not only reflects Hong Kong’s high degree of openness, but also once again confirms the Hong Kong government’s inclusive attitude towards cryptocurrency. It still has a certain appeal to the Chinese cryptocurrency circle, and the increase in cryptocurrency usage scenarios can further enhance Hong Kong’s position in the encryption field. In the long run, it will form a clustering effect from the two major directions of talent and capital, and promote the vigorous development of Hong Kong’s Web3 industry.
Looking at Hong Kong's planning in recent years, in addition to new capital immigrants, since the end of 2022, the Hong Kong Special Administrative Region Government has successively issued a number of measures to attract foreign talents to Hong Kong, including optimizing the existing talent entry program policies such as the Quality Talent Program, the newly launched High Talent Program and other measures to diversify the recruitment of talents and enrich Hong Kong's talent pool. The reason for the launch is also very simple. There are too many people in Hong Kong. Before 2022, Hong Kong's permanent population declined for five consecutive years, from 7.365 million in 2019 to 7.224 million in 2022, and the departure data was even more obvious. From July 2020 to June 2023, 6.33 million Hong Kong residents left Hong Kong via the airport, of which only 5.8 million returned to Hong Kong. In other words, the net number of people leaving Hong Kong in three years is as high as 530,000, which accounts for almost 7% of the permanent population.
From the current point of view, the introduction plan has achieved remarkable results. According to the summary of the Hong Kong Immigration Department, nearly 140,000 visas for various talent entry programs have been successfully approved in 24 years, an increase of 4,000 over 23 years. As of January 2, since the launch of the "New Capital Investor Entry Program", Hong Kong has successfully received more than 750 applications, with an estimated total investment of more than HK$22 billion, but unfortunately, only two applicants are involved in the use of crypto assets at this stage. In addition, under the macro-background of contraction in recent years, Hong Kong's local economy has also been hit. According to a report by the Hong Kong Economic Journal, Hong Kong's retail sales in December last year were 32.8 billion yuan, a year-on-year decrease of 9.7%, and a decline for 10 consecutive months. The report also mentioned that cryptocurrencies are popular among young people and have become one of the external pillars of Hong Kong's consumer market.
Against this backdrop, Hong Kong's attention to the Web3 sector has not diminished but increased. Looking at the past year alone, Hong Kong's window characteristics have become increasingly prominent. It has taken into account both regulation and inclusiveness in the direction of virtual assets, presenting a situation of perfect policies and ecological support, and has made significant progress in product innovation, platform licensing, and extension of the regulatory framework.
From the product side, in 2024, Hong Kong approved six Hong Kong virtual asset spot ETFs issued by three fund companies, namely China Asset Management (Hong Kong), Bosera International and Harvest International, which greatly improved the convenience of investors' purchases and promoted the compliance and product development of virtual assets. As of now, the three Bitcoin spot ETFs hold a total of 4,330 Bitcoins with a total net asset value of US$425 million, and the Ethereum spot ETF holds 2,083 Ethereums with a net asset value of US$56 million.
From the perspective of exchanges, the new virtual asset regulations have been implemented for one and a half years. So far, there are 9 approved virtual asset trading platforms in Hong Kong, more than 31 securities firms have obtained the upgrade of virtual asset No. 1 license, and more than 36 asset management companies have obtained the upgrade of virtual asset No. 9 license. In the highly watched Payfi field, the Hong Kong Monetary Authority not only launched the Ensemble project to explore RWA and CBDC, but also continued to extend from platforms to derivative institutions on the regulatory side, and continuously improved regulatory regulations. Recently, the relevant bill committee of the Legislative Council of Hong Kong reviewed the "Stablecoin Bill" for the first time. If there are no exceptions, the bill will come into effect this year, successfully achieving the same business, the same risks, and the same rules for regulating stablecoin licensees, so that stablecoins have rules to consult. Last year, Hong Kong launched the stablecoin issuer sandbox to continue to promote the access of traditional finance and Web3 systems. The next step of the regulations will be in the direction of OTC and custody. It is expected that the second round of public consultation on the supervision of virtual asset over-the-counter (OTC) transactions will be completed this year, and a consultation plan for the licensing system of virtual asset custody service providers will be launched.
The environment conducive to the development of Web3 is being consolidated, but from the perspective of the market, given the limited market size and high costs, Hong Kong will ultimately be difficult to become the source of global Web3 development, and its influence on the global crypto market is almost negligible. This can be seen from the virtual asset ETF, which is more than an order of magnitude lower than the net assets of the US Bitcoin ETF of more than 111.78 billion US dollars. Even this immigration policy, some crypto practitioners said that the price is high and the cost performance is not high. "It is better to go to Singapore or Australia than to go to Hong Kong for 30 million Hong Kong dollars. Dubai's golden visa is only 4.24 million Hong Kong dollars."
But as mentioned before, Hong Kong is not planning to grab market share from the crypto market, but to try to build a new decentralized financial system based on traditional finance to fill the gap in virtual assets, that is, to consolidate the position of the traditional financial center, and to connect with the future digital asset trading era from the perspective of innovation. This is also the reason why Hong Kong is currently focusing on the stablecoin and RWA fields while developing virtual asset trading platforms in a licensed manner. As the old saying goes, although Hong Kong is not the most active region in crypto, "small government, big market" also means security and stability, and from the perspective of traditional capital, security is far more important than other factors.
