Blockchain and Web3: Private Wealth Magnets of Tomorrow

Water, we all know, flows along paths of least resistance. The same might be said of money — particularly high-net-worth money.

Wealth offers a degree of mobility not afforded to the masses. In fact, wealth insists on mobility as an option — an escape hatch allowing high-net-worth individuals to decamp from a decaying situation and root once more in economies more welcoming to their wealth or their business objectives.

Which goes a long way in contextualizing Henley & Partners’ new high-net-worth-individual migration statistics. One might rightly suspect wealth to flow out of places like Russia, China, and Brazil — countries riven by social and political discord that represents a threat to wealth. Similarly, one might rightly expect money to flow to places such as Australia, the USA, and Switzerland — countries where, historically, greater opportunities to protect and grow wealth have existed.

But today, signs hint at the fact that tomorrow’s high-net-worth migrants need to take into account a set of factors different than those that have historically driven wealth migration.

Those factors include not only the obvious degradation of social and political systems in Western countries such as America and the UK, but also emerging economic opportunities as crypto and blockchain technology reshape the global economy.

The USA is losing its edge in the Web3 revolution

Though crypto is a dirty word among many, the reality is that the internet we’ve known for more than 30 years is morphing into what’s known as Web3, an immersive version of the internet that will exist in three-dimensional space all around us, and which exists because of blockchain and crypto technology. When firms such as J.P. Morgan, Nike, Microsoft, Goldman Sachs, McDonald’s, PayPal and scores of others are putting billions of dollars to work in blockchain, it’s definitive proof we sit on the cusp of the next great economic revolution.

A revolution from which multi-trillion-dollar opportunities will emerge.

However, here’s the problem high-net-worth migrants must be aware of, particularly those looking to put wealth to work in Web3: The USA is already losing its technological edge while other countries are stepping up their game, and that will shape where wealth choses to flow.

The U.S. Securities and Exchange Commission (SEC), as well as certain powerful Democratic congressional leaders have taken an aggressively anti-crypto stance. So parochial is the SEC that one of its own commissioners, Hester M. Peirce, called out her employer for “not allowing innovation to develop and experimentation to happen in a healthy way”, adding, “and there are long-term consequences of that failure.”

Consequences are already apparent.

Crypto-friendly nations stand to gain as America and UK lose appeal

Since 2017, the USA has lost on average 2% of its blockchain developers every year, meaning that America, once home to 40% of the world’s so-called ‘crypto devs’, is now down to about 29%. They’re fleeing overbearing regulation and heading to places like Europe and Asia, which are home to countries more welcoming to blockchain technology.

Indeed, just recently the European Union approved the world’s most comprehensive crypto laws, giving the industry greater operational clarity, a move lauded globally by crypto leadership. That, in turn, has already spurred a flurry of venture-capital funding in Europe — money flowing along the path of least resistance toward the technology of tomorrow.

That’s a precursor to the arrival of high-net-worth migrants.

Consider Coinbase, among the world’s biggest centralized crypto exchanges. Coinbase’s C-suite is so frustrated by the SEC that it recently engaged in talks with the UAE about relocating to Dubai, which is rapidly emerging as a blockchain leader. That would see high-net-worth executives migrating.

Conveniently, the UAE is emerging as a popular destination for wealth migration, according to Henley & Partners’ data. In fact, it was leading the league tables last year in the net millionaire inflows. That trend is likely to continue because of the UAE’s reputation for low taxes, high-quality healthcare, a luxury lifestyle, and personal safety.

Henley expects Australia will top the ranks this year with a net influx of some 5,200 millionaire migrants. Again, not coincidental that Australia is widely viewed as a crypto-friendly country with sensible laws that protect consumers but also foster blockchain innovation.

This isn’t to say the USA will soon see a net exodus of wealth. That’s not likely for any number of reasons.

Nevertheless, America’s attractiveness to wealth migrants is already waning.

Last year, the USA saw net high-net-worth migrants drop to just 1,500 from 10,500 in 2019. Going back to 2013, the net inflow of millionaires in America never dipped below 6,400. Something is clearly afoot.

And while that ‘something’ is certainly more than a focus on crypto (think: increasing gun violence, increasing political hatreds, and a clear devolution toward erasing personal rights at the state level), America’s globally recognized Luddite view of crypto is a clear factor. Crypto business leaders refuse to accept the risks America represents.

In the past, America was the obvious destination for wealth migrations because of its technology leadership and vaunted freedoms. Soon, however, the USA could begin to resemble the UK, traditionally one of the top destinations for migrating wealth, but which is now experiencing a net exodus of millionaires because of the economic impacts wrought by the own-goal known as Brexit.

Wealth hubs of the future 

Along with the UAE, Singapore and parts of the European Union — particularly Portugal, Italy, Spain, France, and Greece — seem well positioned to attract the high-net-worth migrants of tomorrow.

Net wealth migration into Singapore has been rising for a decade, but recently ramped up alongside the city-state’s reputation as one of the planet’s most crypto-friendly nations. Wealth leaving China and Hong Kong gravitates to the small nation-state because of culture and language ties, and because the economy is governed by a legal and financial system as robust as those in the USA and Europe.

Wealth migration into Singapore promises to heat up as high-net-worth individuals look for a home that allows them greater — and safer — opportunities to put money to work in Web3.

Portugal, Spain, Italy, and France benefit not only from the European Union’s new crypto-friendly framework, they’re also warm, sunny, coastal countries that naturally attract wealth because of their appealing lifestyle. And they naturally attract Brexit refugees who want to remain in the European Union.

No surprise that Portugal, in particular, saw a record number of wealth migrants enter the country in 2022. The Iberian nation is considered one of the most crypto friendly in the world. Meanwhile, Henley & Partners expects France will see 1,000 high-net-worth migrants this year, double last year’s effort.

Greece is also widely viewed a crypto-friendly nation. Moreover, it offers the opportunity to pursue a golden visa for just USD 250,000, placing it among the more affordable options for obtaining legal residence in the European Union. Little wonder that net high-net-worth individual migration into Greece was 1,000 last year — not far off its pre-Covid peak of 1,100 in 2019 and an impressive increase from just 100 in 2015.

Wealth migration has always been about chasing greater opportunity while also taking wealth out of harm’s way. That will never change. But what will change — what’s already changing — is the landscape that defines where wealth will likely migrate to tomorrow.

That landscape is increasingly built on the blockchain.