Hong Kong Investment Immigration New Policy: Crypto Assets as a Viable Option and Challenge for Asset Proof

Recently, InvestHK approved a high-profile case in which an applicant successfully qualified for investment immigration with HK$30 million in Ethereum (ETH) as proof of assets. This is not the first time this has happened, as there was already a precedent for successful applications using Bitcoin in October last year. While this may seem like a new path for crypto holders, in practice, many large coin holders have hit a key hurdle – Proof of Source (SOF).

The Rationality of Crypto Assets as Proof of Assets

The "New Capital Investor Immigration Scheme" in Hong Kong requires applicants to prove they have at least 30 million HKD in assets, including stocks, bonds, deposits, and properties. Crypto Assets are accepted as proof of assets primarily based on two points:

1. Policies are not explicitly prohibitive: The Hong Kong government maintains an open attitude towards asset types, as long as accountants can provide reports certifying the authenticity and ownership of these assets, they generally meet the requirements.

2. Successful cases: According to industry insiders, there have been a number of successful cases of using cryptocurrencies as proof of assets, from Bitcoin to Ethereum, and as long as the process is compliant, there is no essential difference between cryptocurrencies and traditional assets in the application process.

However, proving asset ownership and proving the source of funds are two entirely different challenges.

Proof of Source of Funds: The Biggest Obstacle

There is a common dilemma in the Crypto Assets circle - "Coins can be taken out, but the money is unclear." This mainly stems from the following factors:

• The historical records of early participants are incomplete: Many people obtained Crypto Assets through mining, over-the-counter trades, or gifts from friends, making it difficult to provide complete bank statements or transaction records.

• Compliance issues of trading platforms: Some major exchanges have faced compliance challenges, resulting in the loss of historical data for some users or non-recognition by regulators.

• The double-edged sword effect brought by anonymity: Although blockchain transactions are transparent, the association between wallet addresses and actual identities is difficult to establish directly, making it more challenging for accountants and immigration authorities to trace the source of funds.

For example, an investor invested 1 million HKD to buy Bitcoin in 2017, and now its value has increased to 10 million HKD. However, if the transaction records from that time cannot be traced or were completed through cash transactions, proving the legal source of this 10 million HKD will become a severe challenge.

The Predicaments Faced by Accountants

Hong Kong's policy requires proof of assets to rely primarily on reports from Certified Public Accountants (CPAs), but accountants also face a number of challenges when dealing with cryptocurrency-related cases:

1. Valuation standards are not uniform: Cryptocurrency prices fluctuate dramatically, and different accountants may have different ways of dealing with whether they should be calculated at the price at the time of application or the average value of the past period.

2. The responsibility for anti-money laundering is significant: If the source of the client's funds is unclear, accountants may face joint liability when issuing reports.

3. High technical requirements: Verify the ownership of wallet addresses, distinguish between self-owned assets and temporarily borrowed assets, etc., all require professional technical knowledge.

Strategies to break out of the dilemma

For investors looking to apply for immigration using crypto assets, the following suggestions may be helpful:

1. Complete record-keeping: From the initial purchase of cryptocurrency, all relevant documents such as transfer records, exchange bills, tax payment certificates, etc., should be kept, and even handwritten receipts may be useful evidence.

2. Seek professional assistance: It is essential to form a professional team that includes lawyers, accountants, and immigration consultants, especially those familiar with Crypto Assets and Hong Kong policies, who can design a compliant application pathway for applicants.

3. Compliance of funds: If the source of funds is unclear in the early stage, it can be considered to carry out compliance treatment of funds in batches.

Overview of the New Hong Kong Investment Immigration Policy

The Hong Kong government recently announced the "New Capital Investor Entry Scheme" which sets a minimum investment threshold of HKD 30 million. Applicants are required to invest at least HKD 27 million in permitted financial assets and non-residential real estate, and to invest HKD 3 million in the "Capital Investor Entry Scheme Investment Portfolio" to support the development of innovative technology and other key industries.

It is worth noting that the scope of permissible investment assets has expanded. According to the official list, the interests of a limited partnership fund (LPF) and an open-ended fund company (OFC) managed by a Hong Kong Type 9 company are both recognized as investable assets, providing investors with more choices.

Overall, although the new policy in Hong Kong provides investment immigration opportunities for Crypto Assets holders, there are still many challenges in the application process, especially in terms of proving the source of funds. Investors need to make adequate preparations in advance and seek professional guidance to increase the chances of a successful application.

! Hong Kong's new regulations on investment immigration: cryptocurrencies can be used as proof of assets, but the actual operation is not smooth sailing