SFC reminded token issuers in Hong Kong that they must get licensing from the Commission.
On June 6, amid the growing popularity of non-fungible tokens (NFTs), Hong Kong’s Securities and Futures Commission (SFC) issued a reminder to traders about the potential dangers of investing in such digital assets. “As with other virtual assets, NFTs are exposed to heightened risks including illiquid secondary markets, volatility, opaque pricing, hacking and fraud,” the SFC implied.
The official statement suggested that traders who don’t completely understand the possible losses of investing in NFTs should refrain from such digital assets.
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The SFC stated that NFTs which possess a digital representation of a collectible are not considered part of the necessary regulation, such as a digital image, music, piece of art, or video.
On the other hand, digital assets that are beyond a financial and a collectible asset, such as fungible and fractionalized NFTs considered part of a “collective investment scheme" (CIS), are subject to the SFC’s jurisdiction.
On top of that, unless an exception exists, entities that engage in a regulated activity in Hong Kong must request licensing from the SFC. Interestingly enough, the SFC also stated that the Securities and Futures Ordinance (SFO) authorization requirements may apply even then when the NFT agreement invites individuals in Hong Kong to participate in the CIS.
Throughout the years, Hong Kong regulators have adopted different approaches to various sorts of digital assets. For instance, earlier this year, the SFC proposed a bill to provide only professional investors access to cryptocurrencies.
