Hong Kong Sparks New Follow: Encryption Assets Officially Included in Investment Immigration Program

Despite the market sentiment still appearing cold, a recent initiative in Hong Kong has sparked new interest in the industry.

Recently, a practicing accountant in Hong Kong revealed on social media that the Hong Kong Investment Promotion Agency has approved an investment immigration application using 30 million HKD worth of Ethereum as proof of assets. The accountant also stated that last October he successfully handled Hong Kong's first investment immigration case using Bitcoin as proof of assets.

This news undoubtedly lowers the threshold for overseas immigration for cryptocurrency holders, especially for wealthy Chinese individuals. 30 million HKD is not a staggering number in the well-funded encryption circle, and Hong Kong is also a natural choice for many Chinese.

However, is investment immigration really as simple as it seems? Is Hong Kong truly an encryption utopia? Different people have different answers in their hearts. In fact, this policy is part of the new Capital Investment Entrant Scheme (CIES) launched by the Hong Kong government in 2023. The scheme is open to qualified investors and aims to attract external investors and capital, further consolidating Hong Kong's position as an international asset and wealth management center.

According to the plan, eligible investors can obtain a stay visa after investing HKD 30 million in approved assets in Hong Kong. After residing in Hong Kong for 7 years, there is an opportunity to apply for permanent residency in Hong Kong. Although the policy seems simple, there are still many details to pay attention to in actual operation.

First, the applicant must hire a professional accountant in Hong Kong at their own expense to provide 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. The applicant only needs to prove that they actually have net assets or net capital with a market value of no less than 30 million Hong Kong dollars within 6 months prior to the date of submitting the net asset review application. It is worth noting that this period was originally two years, which was later optimized by the Hong Kong government to six months.

In addition to asset proof, the core goal of the Hong Kong government is to attract capital inflow into Hong Kong. Applicants must invest no less than 30 million HKD in designated permitted investment asset categories within 6 months before submitting the application or within 6 months after approval. These asset categories include:

1. HKD 27 million invested in financial assets (traded in HKD/CNY), such as stocks of companies listed on the Hong Kong Stock Exchange, debt securities, certificates of deposit, subordinated bonds, etc.
2. Qualified collective investment schemes, including funds, real estate trusts, open-end funds, and life insurance plans that have obtained the relevant licenses.
3. Private limited partnership fund registered in Hong Kong.
4. Real estate for non-residential commercial or industrial use (including pre-sale properties but excluding land), with an investment cap of 10 million HKD.

The remaining 3 million HKD must be invested in the "Capital Investor Immigration Scheme Investment Portfolio", which was established by a Hong Kong investment management company, primarily investing in companies or projects related to Hong Kong to support the innovation technology industry and other key sectors that contribute to Hong Kong's long-term development.

After completing the above investment, the Hong Kong Immigration Department will issue a 2-year stay visa, which needs to be renewed afterwards. The renewal is usually in the form of 3+3, but each year the applicant needs a verification report from a professional accountant to prove that the total investment amount is still not less than 30 million Hong Kong dollars, and that the assets have not been transferred or used for other purposes.

It is worth noting that the participation in this cryptocurrency mainly focuses on the initial verification stage. Cryptocurrencies such as Bitcoin and Ethereum can be used for asset identification and can be stored in cold wallets or proven through large trading platforms. However, not all cryptocurrencies can be used for this proof, currently limited to those with relatively stable value, large circulation, and legal status in Hong Kong.

For cryptocurrency holders, the biggest challenge is not withdrawing funds, but proving the legitimacy of the source of funds. When using cryptocurrency as proof of assets, relevant institutions and accountants will require clients to provide proof of the source of funds, including the original source of funds used to purchase the cryptocurrency, as well as the place and time of purchase. Given the volatility and anonymity of the cryptocurrency market, these questions are often difficult to answer, becoming the real difficulty for cryptocurrency asset immigration.

In any case, Hong Kong's investment immigration has accepted encryption for the first time, which not only demonstrates Hong Kong's open attitude but also reaffirms the government's inclusiveness towards encryption. This still holds certain appeal for the Chinese encryption community and also helps enhance Hong Kong's status in the encryption field. In the long term, this may create a clustering effect in terms of talent and capital, promoting the vigorous development of Hong Kong's Web3 industry.

In recent years, the Hong Kong Special Administrative Region government has introduced a series of measures to attract foreign talent, including optimizing the existing talent admission scheme 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 introducing these policies is simple: Hong Kong is facing serious population loss. Before 2022, the resident population of Hong Kong declined for five consecutive years, dropping from 7.365 million in 2019 to 7.224 million in 2022. The data on departures is even more pronounced, as from July 2020 to June 2023, 6.33 million Hong Kong residents left via the airport, of which only 5.8 million returned. In other words, the net outflow of residents from Hong Kong over three years reached as high as 530,000, accounting for nearly 7% of the resident population.

As of now, these introduction plans have shown significant results. According to statistics from the Hong Kong Immigration Department, nearly 140,000 various talent admission visas were successfully approved in 2024, an increase of 4,000 from 2023. As of January 2, since the launch of the "New Capital Investor Admission Scheme," Hong Kong has successfully received over 750 applications, with an expected total investment amount exceeding HKD 22 billion. However, currently, only 2 applicants involve the use of encryption assets.

In recent years, under the backdrop of economic contraction, Hong Kong's local economy has also been impacted. According to reports, last December, Hong Kong's retail sales amounted to 32.8 billion, a year-on-year decrease of 9.7%, marking a decline for 10 consecutive months. It is noteworthy that the popularity of encryption currency among the younger demographic has become one of the external supports for Hong Kong's consumer market.

In this context, Hong Kong's focus on the Web3 sector has not diminished but increased. In just the past year, Hong Kong has balanced regulation and inclusiveness in virtual assets, presenting a situation of improved policies and ecological support, achieving significant progress in product innovation, platform licensing, and the extension of regulatory frameworks.

From the product side, in 2024, Hong Kong approved three fund companies to issue six Hong Kong virtual asset spot ETFs, greatly enhancing the purchasing convenience for investors and promoting 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 $425 million; the Ethereum spot ETF holds 2,083 Ethereums, with a net asset value of $56 million.

In terms of exchanges, since the implementation of the new virtual asset regulations a year and a half ago, Hong Kong has approved 9 virtual asset trading platforms, over 31 brokerages have upgraded to virtual asset license type 1, and more than 36 asset management firms have upgraded to virtual asset license type 9. In the highly watched Payfi sector, the Hong Kong Monetary Authority has not only launched the Ensemble project to explore RWA and CBDC, but has also continuously extended regulations from platforms to derivative institutions, constantly improving regulatory provisions.

Recently, the relevant bill committee of the Hong Kong Legislative Council reviewed the "Stablecoin Regulation Draft" for the first time, and it is expected that the bill will take effect this year, regulating stablecoin license holders under the same business, same risks, and same rules, providing a regulatory framework for stablecoins. Last year, Hong Kong also launched a stablecoin issuer sandbox, continuously promoting the integration of traditional finance and Web3 systems. The next step in the regulations will focus on OTC and custody directions, with the expectation that the second round of public consultation on the regulation of virtual asset over-the-counter (OTC) trading will be completed this year, and a consultation proposal for the licensing system of virtual asset custody service providers will be introduced.

The environment conducive to the development of Web3 is gradually being solidified, but from a market perspective, under the constraints of limited market size and high costs, it is difficult for Hong Kong to become a hub for global Web3 development, and its influence on the global encryption market is relatively limited. This is evident from the scale of virtual asset ETFs: compared to the over $111.78 billion net assets of Bitcoin ETFs in the United States, the scale in Hong Kong is far behind.

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

Although Hong Kong is not the most active region for encryption activities, its characteristics of "small government and large market" mean security and stability. For traditional capital, safety is often more important than other factors. In this context, Hong Kong is gradually building an encryption ecosystem that balances innovation and stability, laying the foundation for future financial development.