The global surge in crypto adoption has prompted the Hong Kong government to position itself as a Web3 and crypto hub. With one of the highest crypto adoption rates, the government aims to attract family offices through initiatives like the “Capital Investor Entry Scheme,” targeting high-net-worth individuals to stimulate financial activity and investment in the region.
A family office serves as a private wealth management firm catering to the financial needs of high-net-worth individuals and families. It provides services such as investment management and financial planning. Hong Kong’s objective is to attract these offices to stimulate financial activity and investment in the region.
Capital investor entry scheme and global interest
In March, Hong Kong announced the “Capital Investor Entry Scheme” with an entry threshold of NT$30 million, receiving inquiries from clients globally, signaling potential demand for these initiatives. However, concerns from lawmakers about potential asset movement due to political considerations pose challenges despite tax incentives.
The demand received by PwC is not only in Hong Kong but also globally, as new investors are increasingly showing interest in digital assets. The surge in demand is attributed to the potential approval of BlackRock’s spot Bitcoin ETFs/Ethereum ETFs and the fact that the Bitcoin price breached the major hurdle of the $31,000 level.
Currently, the majority of financial institutions, tech giants, banking institutions, and several major firms are embracing blockchain technology and preparing to adopt cryptocurrencies.
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Hong Kong’s resumed investment immigration program and incentives
On November 13, 2023, Hong Kong resumed its investment immigration program, excluding real estate and mainlanders. PwC highlights client interest due to low tax rates and the absence of inheritance tax. While the entry threshold may rise to NT$30 million, the seven-year timeline for permanent residence is expected to attract high-end customers.
Lawmakers suggest clarifying asset classifications, such as considering Bitcoin as a financial product, and debates surrounding property purchases to stimulate the real estate market. Some propose tax relief to expand eligible asset classes beyond traditional investments, recognizing family offices’ interest in alternative products like art, wine, and virtual assets.
Challenges exist, such as the exclusion of certain investment categories from the current preferential tax system. Family offices often hold interest-earning assets, but the existing rules need optimization to accommodate their structures.
While the Hong Kong government aims to have 200 family offices settled or expanded in the city by 2025, there are no official statistics on current family office numbers. Some experts emphasize the importance of attracting family offices from the Middle East, highlighting the need to establish trust and build connections in that region.