Hong Kong Investment Immigration New Policy: Proof of Crypto Assets is Recognized, but Practical Challenges Remain

Recently, the Hong Kong Investment Promotion Agency made a remarkable decision: an investor successfully obtained investment immigration qualification by using 30 million HKD worth of Ethereum (ETH) as proof of assets. This is not the first time this has happened; last October, an investor completed a similar application using Bitcoin. Although this seems to open a convenient path for Crypto Assets holders, in practice, many large coin holders encountered obstacles in the key step of proving the source of funds (SOF).

The Feasibility of Crypto Assets as "Proof of Asset"

The "New Capital Investor Immigration Scheme" in Hong Kong requires applicants to prove that they (or jointly with their spouse) possess at least HK$30 million in actual assets, including but not limited to stocks, bonds, deposits, and real estate. The main reasons why Crypto Assets are accepted as valid assets are twofold:

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

2. There are precedents in the market: Industry insiders reveal that there have been multiple successful cases using Bitcoin, Ethereum, and other Crypto Assets as proof of assets. As long as the procedures are compliant, there is no essential difference between Crypto Assets and traditional assets in the application process.

However, proving asset ownership and proving the source of funds are two different concepts, with the latter often becoming the biggest challenge faced by applicants.

Proof of Source of Funds: The Greatest Challenge

There is a common contradiction within the Crypto Assets circle: assets are easy to verify, but their origins are difficult to explain. This is mainly reflected in the following aspects:

• Early participants have incomplete historical records: Many people acquired Crypto Assets through mining, over-the-counter trading, or gifts from friends, making it difficult to provide complete bank statements or transaction records.

• Issues with trading platforms affect trust: Some well-known exchanges have faced compliance issues, resulting in the loss of user historical data or lack of regulatory recognition.

• The anonymity feature has a dual impact: the transparency of the blockchain cannot directly associate wallet addresses with actual identities, making it more difficult to trace funds.

For example, an investor invested 1 million HKD to purchase Bitcoin in 2017, which is now worth 10 million HKD. However, if the transaction records from back then are no longer traceable, or if the transaction was completed in cash, proving the legitimacy of these funds will become extremely difficult, potentially directly affecting the outcome of immigration applications.

Challenges Faced by Accountants

Hong Kong policies stipulate that asset proof mainly relies on professional reports from Certified Public Accountants (CPA). However, accountants also face many difficulties when handling Crypto Assets related businesses:

1. Valuation standards are not uniform: The prices of Crypto Assets fluctuate significantly, and whether to use the instantaneous price at the time of application or the average value over a period of time may lead different accountants to adopt different approaches.

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

3. High technical requirements: Verifying wallet address ownership, distinguishing between own assets and temporarily borrowed assets, etc., all require specialized blockchain knowledge.

Strategies for Overcoming Difficulties

For investors looking to apply for immigration through Crypto Assets, several aspects can be considered:

1. Improve the evidence chain: Keep the transfer records, exchange invoices, tax certificates, and other documents related to the purchase of Crypto Assets from the very beginning. Even handwritten receipts are better than nothing.

2. Seek professional support: Assemble a professional team that includes lawyers, accountants, and immigration consultants, especially institutions familiar with Crypto Assets and Hong Kong policies, to help design a compliant application pathway.

3. Gradual Normalization: For cases where the sources of early funds are unclear, it may be considered to carry out compliance processing in batches.

In addition, the Hong Kong government has recognized some new types of investment assets in the "New Capital Investor Entry Scheme", including the equity of Limited Partnership Funds (LPF) and Open-ended Fund Companies (OFC) managed by Hong Kong licensed companies. This provides investors with more options and reflects Hong Kong's open attitude towards attracting innovative capital.