Who are the “big guns” of the cryptospace? What do they do? Which countries do they belong to? These are the kinds of questions many in the industry ask because of its nascence.
That is set to change with the emergence of institutional participation.
Henley & Partners, the world’s leading investment migration experts took a “deep dive” into the cryptospace with their “Crypto Wealth Report”.
The results surprised me.
I know you would be pleasantly moved as well.
C’est la vie…
João Mira Gomes, Senior Manager in Government Advisory at Henley & Partners
Please can you tell us about the crypto wealth report?
“Henley & Partners’ Crypto Wealth Report is a publication for those following crypto assets and private wealth, and investment migration trends — whether global citizens, crypto investors, wealth managers, or private bankers.”
What was the intent of its preparation?
“Henley & Partners prepared the report in response to the growing number of our clientele who have made their fortunes in digital assets. As Dominic Volek, Group Head of Private Clients at the firm, points out in the report that just as alternative residence and citizenship are fast becoming a highly coveted asset class among wealthy individuals, digital assets are also growing in popularity despite their inherent volatility. “Some of the most attractive locations for those involved in cryptocurrencies are in countries that offer residence and citizenship by investment programs, which enable them to obtain the right to reside and/or citizenship in return for making a significant investment. Cryptocurrencies’ prominence in high-net-worth individuals’ portfolios has also increased as investors seek new sources of return and diversification.”
What is the report’s focus?
“The report includes statistics on crypto and Bitcoin millionaires, centi-millionaires, and billionaires provided by global wealth intelligence firm New World Wealth, as well as insights from leading academics and industry experts. It also features Henley & Partners’ Crypto Adoption Index, which compares the best investment migration programs for crypto investors.”
What methodology was used?
“The Crypto Wealth Report is published by Henley & Partners in partnership with global wealth intelligence firm New World Wealth, which is currently the only known independent wealth research firm systematically tracking global wealth migration trends between countries and cities. New World Wealth tracks the movements and spending habits of over 150,000 high-net-worth individuals in its in-house database, with a special focus on individuals with over USD 10 million in investable assets. The database is focused on company founders and affluent individuals from high value companies with the following work titles: chairperson, CEO, president, director, and managing partner. This data is used as a base in all New World Wealth’s wealth and crypto modeling.
Note: It should be noted that New World Wealth never discloses the names of the individuals in its database, which it uses purely for in-house statistical studies.
New World Wealth also considered the following sources as sanity checks for its data:
- Public information on large crypto holdings from major platforms such as Binance, CoinMarketCap, BscScan and Etherscan.
- In-house wealth tier models, which benchmark billionaires, centi-millionaires, and other high-net-worth individuals using a progressive Lorenz curve distribution.
You can read the full methodology here.”
Can you briefly give us a few insights gleaned from the report?
“Certainly, the report reveals that there are 88,200 crypto millionaires worldwide, with just under half (40,500) holding their fortunes in Bitcoin. The total market value of crypto is now a staggering USD 1.2 trillion and there are 425 million individuals globally that own cryptocurrencies. Of these 425 million, there just 22 crypto billionaires (those with crypto holdings of USD 1 billion or more), and 6 of the 22 are Bitcoiners.
Singapore takes the top spot overall on the Crypto Adoption Index, followed by Switzerland and the UAE in 2nd and 3rd places, respectively.”
Why is Bitcoin still the “king of the hill” per adoption?
“As Dr. Niklas J.R.M. Schmidt, TEP CBP is a partner at the Austrian law firm Wolf Theiss explains in his essay in The Crypto Wealth Report, Bitcoin (“the king of crypto”) and Ether (“the queen of crypto”) are the top two crypto assets. He points out that Bitcoin is the original crypto asset and the most well-known. Dr. Schmidt writes “When speaking of the top two crypto assets, I am referring to the market capitalization. The market capitalization of a crypto asset — similar to stocks — results from multiplying the circulating supply by its respective price. Of all crypto assets, Bitcoin has the largest and Ether the second-largest market capitalization. Another interesting metric is market share: The market share of a crypto asset results from the ratio of its own market capitalization to the market capitalization of all crypto assets. Currently, Bitcoin and Ether together have approximately 65.2% market share. By way of comparison, the next three crypto assets have market shares of 7.6%, 2.9%, and 2.5%. Thus, for many investors new to the crypto space it could make sense to limit oneself initially to investments into Bitcoin and Ether, since these are by far the largest players.”
What is the crypto adoption index?
“Including over 750 data points within six main parameters comprising 19 sub-parameters and 29 indicators, Henley & Partners’ Crypto Adoption Index is designed to assess and rank crypto-friendly investment migration host countries based on their level of adoption and integration of cryptocurrencies and blockchain technology. Investment migration, also known as residence and citizenship by investment, is a mechanism by which affluent investors acquire residence rights or citizenship of a host country in return for making a significant investment into that country’s economy.
The Crypto Adoption Index takes into consideration various factors that contribute to a country’s crypto ecosystem, providing a comprehensive overview of the extent to which they are embracing this emerging technology.”
What factors determine country rankings on the index?
“The six key parameters the index considers are public adoption, infrastructure adoption, innovation and technology, regulatory environment, economic factors, and tax-friendliness.”
Can you tell us about your data sources?
“The index relies on a wide range of data sources, including the World Bank and official government statistics. The comprehensive lists of sources for each parameter are lengthy and are provided in the methodology.”
Which countries are crypto tax-friendly?
“In terms of the tax-friendliness parameter, which assesses a country’s approach to taxing cryptocurrency-related activities, Singapore and the UAE score a flawless 10 out of 10 on the Henley Crypto Adoption Index. The firm’s research team examined aspects such as tax rates on crypto transactions, mining, staking rewards, and capital gains. Hong Kong, Mauritius, and Monaco all secure an impressive 9 out of 10 when it comes to tax efficiency, with Antigua and Barbuda, Malaysia, Namibia, and Switzerland each achieving a respectable 8 out of 10.”
Which countries have the highest rates of public adoption?
“The UAE and Singapore again share the leading position when it comes to public adoption, with each scoring 7 out of 10 for this parameter. The UK, US, Canada, Australia, Mauritius, Hong Kong, Switzerland, and Malta all make it into the Top 10 when considering factors such as the percentage of crypto users relative to the total population and Google search interest related to cryptocurrencies.”
What were your determining factors for public adoption rates?
“Public adoption measures the level of awareness, interest, and engagement with cryptocurrencies in the general population. It includes indicators such as the percentage of crypto users relative to the total population, Google search interest related to cryptocurrencies, and the number of institutions offering courses on blockchain and cryptocurrency. Higher public adoption indicates a more crypto-friendly environment.”
Which countries have the highest crypto infrastructure implementations?
“When it comes to infrastructure adoption, which assesses the technological foundations for crypto transactions and exchanges, such as the number of crypto ATMs, integration with local banks, and the presence of digital asset exchanges, both the UAE and Singapore tumble down the rankings. The US currently blazes the trail in this regard, with Greece, Thailand, Hong Kong, and New Zealand all making it into the Top 10 countries with a reasonably well-developed infrastructure that supports smoother crypto adoption.”
Which countries have crypto-friendly investment migration policies?
“While their investment migration policies might not be designed specifically to be crypto-friendly per se, each of the 26 countries in the index has made significant progress in creating a supportive crypto environment, and all are recognized as displaying a degree of crypto-friendliness. This is not to say that other investment migration host countries are not crypto-friendly.”
How does increased crypto awareness help in creating and maintaining new fortunes?
“As global investment expert Jeff D. Opdyke points out in his essay in The Crypto Wealth Report, “With crypto, manufacturers and consumers can track every step of the manufacturing and transportation process to know that a particular USD 3,500 Louis Vuitton OnTheGo bag was created from a particular piece of leather sourced from particular leather workshop in Spain. Technically, you could track back to the individual cow from which the leather originated. To me and you, all of that might sound rather unimportant. But to a business moving hundreds of millions of dollars around the world annually, saving tens and hundreds of thousands of dollars is significant. Authenticating goods in an unhackable way means thwarting pirates who annually steal more than USD 1 trillion from corporate pocketbooks. And that’s why crypto — at a mainstream, every day, utilitarian level — is inevitable. Crypto allows businesses to save scads of money.
Equally important, it opens up fundamentally new venues for reaching consumers and their pocketbooks. Take Nike, for instance. Since December 2021, the athletic-apparel giant has racked up USD 185 million in sales of non-fungible tokens, or NFTs, the digital art cryptocurrency most commonly associated with the Bored Ape Yacht Club and CryptoPunks collections. In Nike’s case, the company is selling digital sneakers, which sounds altogether goofy. Who needs digital sneakers? Well, avatars need digital sneakers to amble about in style in the digital worlds — the metaverses — in which they roam. Through NFTs, younger consumers are dressing their digital Mini-Mes in the same kind of branded swag they don in real life. And they’re spending real dollars doing so. Indeed, Gucci sold a digital handbag for USD 4,115, a price higher than the real-life version of that same bag.
But here’s where crypto tech ventures into the truly revolutionary in terms of corporate profits. Nike has also earned more than USD 93 million simply from royalties. Every time a Nike NFT trades, Nike collects 10% of the sale as the NFT’s creator. That’s ongoing free money with virtually no offsetting expense. Plus, as the value of Nike NFTs rises, the amount of royalty income rises, too. Such an arrangement has never existed. Now that it does, corporations have an entirely new income stream to pursue. Such examples tell you why crypto is inevitable. Business wants crypto because crypto is great for business!”
Ali Khan, a lead on web3 and decentralized finance at AS Legal, writes in his essay, “Whether in supply chains, professional services, or trade finance, many are looking to take advantage of a regulatory and business environment that has everything to gain from applying industry knowledge in new, less concentrated, and innovative ways. Much of this new web 2.5/web3 world is still in early stage development, with big ideas being explored, real utility being established, and value being pursued through building better solutions and systems. But it is here that those who see the true vision of the infrastructure will be building legacy wealth creation. And it is those same parties that inevitably have an interest in maintaining that wealth in jurisdictions that have an established, well-developed capacity to augment intergenerational wealth. In other words, the risk takers that develop wealth often look for non-correlated ways to maintain that wealth.”
Are there any trends that indicate the interest and participation of high-net-worth individuals and institutional investors?
“Henley & Partners’ Group Head of Private Clients, Dominic Volek, states in the report that “As governments scramble to draft new regulations that adapt to shifts in the world of crypto, traders, miners, investors, and cryptopreneurs are exploring investment migration strategies that can safeguard their interests. At Henley & Partners we have seen enquiries from these investors rise significantly. In particular, our clients are looking to build a viable ‘Plan B’ to protect themselves against any potential future bans on the trading or use of cryptocurrencies in their countries and to allay the risks of aggressive fiscal policies that tax digital assets at source.”
How do countries rank in terms of ease of doing business?
“While the index does not have an ‘ease of doing business’ parameter, the Innovation and technology parameter discussed above includes a sub-factor that looks at the number of crypto start-ups, and the Regulatory environment parameter (discussed below) looks at licensing requirements for crypto businesses. When selecting those two parameters, the top 3 countries are Switzerland (scoring 17.6 our of 20), USA (17.3), and Australia (17.2).”
How do countries rank in terms of regulatory frameworks?
“The top 3 countries for the Regulatory environment parameter are Singapore (scoring 8.5 out of 10), closely followed by Switzerland (8.4), and Australia (8.0). This parameter evaluates a country’s legal framework for cryptocurrencies and blockchain technology. Sub-parameters here include the adoption of Initial Coin Offerings (ICOs) and the number of ICOs operated, anti-money laundering/combating the financing of terrorism (AML/CFT) regulations, the legal status of cryptocurrency, clarity of regulations, the development status of central-bank-backed digital currencies, and (as mentioned above) licensing requirements for crypto businesses. A supportive regulatory environment encourages growth.”
When can we see the next crypto wealth report or is it a one-time thing?
“Based on the interest and engagement we are seeing in our inaugural Crypto Wealth Report I’m sure we’ll release a second edition in 2024. Watch this space!”
Where do you see the crypto industry in the next decade? Any crystal ball predictions?
“To quote again from Jeff D. Opdyke, who puts it very well in his essay: “We had the boom. We’ve had the bust. Now we’re in the stage where today’s crypto companies are building the future — the next Amazon, the next Google, eBay, Uber, take your pick. Those who recognize that — who clearly see the analog to the internet, circa 1999 — are the ones who are going to reap the rewards.”
For example, as Aleksandar Bijelić, CEO of MVP Workshop and President of the Board at the Serbian Venture Network, writes in the report, “By embracing web3, the medical research community is poised to lead the way in discovering breakthrough treatments and cures for the most pressing medical challenges of our time, which for regular investors means they should divert their attention to the changes in this field.”
Dr. Juerg Steffen, CEO of Henley & Partners, writes in The Crypto Wealth Report that “The metaverse is reshaping many aspects of society, including how sovereign states think about and manage citizenship. In fact, the whole concept of sovereignty is now coming into question as the virtual frontier expands. As its reach grows and more possibilities emerge, the metaverse is also capturing the imagination of several nation states, which are exploring how they can use it to grow their political capital and sovereign equity. One way they are doing so is by offering virtual citizenship. There would be benefits for states themselves as well. Investment migration (a form of legal migration through which high-net-worth individuals can gain residence and citizenship rights in exchange for investing in the host country) facilitates connections in a globalized economy. It also provides nation states with new possibilities through which to raise much-needed capital, such as by offering digital citizenships. What is more, it could also diversify the type of capital they can attract. The metaverse is built on blockchain, so why couldn’t digital assets, cryptocurrencies, and NFTs become accepted forms of investment?”