The Securities and Futures Commission (SFC) of Hong Kong set out business requirements for offering tokenized securities and other investment products in a circular published on November 2, 2023. The circular provides guidance on a variety of topics, including:
Eligibility: Only SFC-licensed corporations and brokers can offer tokenized securities and other investment products.
Disclosure: Providers must disclose all relevant information about the tokenized product, including the underlying asset, the risks involved, and the terms and conditions of the offering.
Custody: Providers must arrange custody of the underlying assets and tokens.
Compliance: Suppliers must comply with all applicable laws and regulations, including those related to anti-money laundering and anti-terrorist financing.
The SFC has also stated that providers should not use public blockchain networks without permission without additional and appropriate controls.
The SFC's decision to regulate tokenized investments is a positive step for market development in Hong Kong. It demonstrates the SFC's commitment to innovation and its willingness to work with industry to develop a regulatory framework that supports responsible growth.
The intention to tokenize investment products authorized by the SFC is linked to growing market demand and the Government's willingness to facilitate market development. Tokenization has the potential to make investment products more accessible and efficient, and to reduce costs and risks.
The SFC's new requirements will help ensure that tokenized investments are offered in a safe and responsible manner. This is important to protect investors and build confidence in the market.
