The Hong Kong government's new policy accepts encryption assets, but is immigrating to Hong Kong really a good choice?

Despite the continued gloomy market atmosphere, Hong Kong has once again attracted people's attention. Recently, it was reported that the Hong Kong Investment Promotion Agency approved an investment immigration application using Ethereum as proof of assets worth 30 million HKD. Previously, in October last year, Hong Kong also successfully processed the first investment immigration case using Bitcoin as proof of assets.

This policy is undoubtedly good news for cryptocurrency holders, especially for wealthy Chinese individuals. 30 million HKD is not an astronomical figure for the rich in the crypto circle, and Hong Kong, as a region with a significant Chinese population, is also a natural choice. However, is investment immigration really as simple as it seems on the surface? Is Hong Kong truly 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 the program, qualified investors are allowed to obtain a stay visa after investing 30 million HKD in Hong Kong. After residing for 7 years, there will be an opportunity to apply for permanent resident status in Hong Kong. Although the program seems simple, there are still many details to pay attention to in actual operation.

First, the applicant must hire a professional accountant from Hong Kong at their own expense to issue a net asset verification report. There are no special restrictions on the location and composition of the assets; it is only required to prove that the applicant has continuously owned no less than 30 million HKD in net assets or net capital within 6 months prior to the date of submitting the net asset review application.

Secondly, applicants must invest no less than 30 million HKD in designated permitted investment asset categories within 6 months prior to submitting the application or after approval. This includes an investment of 27 million HKD in financial assets, such as stocks of companies listed on the Hong Kong Stock Exchange, debt securities, etc., as well as a mandatory investment of 3 million HKD in the "Capital Investment Entrant Scheme Investment Portfolio" to support innovation technology and other key industries in Hong Kong.

After completing the investment, the Hong Kong Immigration Department will issue a 2-year stay visa, which will need to be renewed afterwards. Each year, applicants are required to provide a capital verification report from a professional accountant to prove that the total investment amount is still no less than 30 million HKD. After living for 7 years, one can apply to become a permanent resident of Hong Kong, at which point the investment amount will no longer be restricted.

It is worth noting that although Bitcoin and Ethereum have been recognized as proof of assets, the applicability of other encryption currencies still needs to be analyzed specifically. Currently, only those currencies with relatively stable values, large circulation, and legal status in Hong Kong are likely to be accepted.

However, the biggest challenge of using cryptocurrency as proof of assets lies in proving the source of funds. Relevant institutions and accountants will require clients to provide proof of the source of funds, including the original source of the funds used to purchase cryptocurrency, as well as the place and time of purchase. For an asset like cryptocurrency, which is highly volatile and has a certain level of anonymity, these questions are often difficult to answer. Therefore, holders must maintain complete transaction records to address this issue.

Nevertheless, Hong Kong has become the first to accept encryption as proof of assets in investment immigration, which not only reflects its open attitude but also reaffirms the Hong Kong government's inclusiveness towards encryption. This still holds certain appeal for Chinese encryption holders and helps enhance Hong Kong's position in the encryption field. In the long run, it may create a clustering effect in terms of talent and funding, promoting the development of Hong Kong's Web3 industry.

In recent years, Hong Kong has introduced a series of measures to attract foreign talent, including optimizing existing talent admission schemes and the newly launched Top Talent Pass Scheme. These initiatives aim to diversify talent recruitment and enrich Hong Kong's talent pool. The reason for implementing these policies is simple: Hong Kong is experiencing serious population loss. From July 2020 to June 2023, the net outflow of population from Hong Kong reached 530,000, accounting for 7% of the resident population.

Currently, these introduction plans have achieved significant results. In 2024, nearly 140,000 various talent immigration plan visas have been successfully approved, an increase of 4,000 compared to the previous year. As of January 2, 2024, the "New Capital Investor Immigration Plan" has received over 750 applications, with a total expected investment of over HKD 22 billion. However, currently, only 2 applicants are involved in the use of encryption assets.

Against the backdrop of the current economic contraction, Hong Kong's local economy has also been impacted. In December last year, Hong Kong's retail sales amounted to HK$32.8 billion, a year-on-year decrease of 9.7%, marking a continuous decline for 10 months. Reports indicate that the popularity of encryption currency among the younger demographic has become one of the external pillars of Hong Kong's consumer market.

In the face of these challenges, Hong Kong's attention to the Web3 field has not decreased but rather increased. Looking back over the past year, Hong Kong has made significant progress in balancing regulation and inclusiveness regarding virtual assets, as well as in policy improvement and ecosystem support.

In terms of product innovation, Hong Kong has approved multiple fund companies to issue virtual asset spot ETFs, significantly enhancing the purchasing convenience for investors. In terms of exchange regulation, Hong Kong has nine approved virtual asset trading platforms, over 31 brokerages have obtained virtual asset license upgrade No. 1, and more than 36 asset management companies have received virtual asset license upgrade No. 9.

In the payment sector, the Hong Kong Monetary Authority has not only launched the Ensemble project to explore RWA and CBDC but is also continuously improving regulations. Recently, the Hong Kong Legislative Council reviewed the "Stablecoin Bill" for the first time, which is expected to take effect this year. In addition, Hong Kong has also introduced a sandbox for stablecoin issuers, continuously promoting the integration of traditional finance and Web3 systems.

Although the development environment in Hong Kong for the Web3 sector is continuously improving, it is difficult for Hong Kong to become a hub for global Web3 development in terms of market size and cost. Compared to the over $111.78 billion in net assets of Bitcoin ETFs in the United States, Hong Kong's influence remains limited. Some encryption practitioners even believe that the cost-performance ratio of this investment immigration policy is not high, and that HKD 30 million could have better options elsewhere.

However, Hong Kong's goal is not to seize a share of the encryption market, but to attempt to build a new decentralized financial system based on traditional finance, in order to fill the gap in virtual assets. Hong Kong hopes to consolidate its position as a traditional financial center while also connecting with the future era of digital asset trading from an innovation perspective. This also explains why Hong Kong focuses on stablecoins and RWA while regulating virtual asset trading platforms.

Although Hong Kong may not be the most active region for cryptocurrency, its characteristics of "small government, large market" imply safety and stability. For traditional capital, security is often more important than other factors. Therefore, despite Hong Kong's limited influence in the global cryptocurrency market, its status as a traditional financial center still attracts investors seeking stability and security.