The Securities and Futures Commission (SFC) of Hong Kong has issued two circulars to control digital asset tokenization.
The circulars offer directions to intermediaries taking part in tokenized securities actions and description the standards for tokenizing funding merchandise licensed by the SFC.
The SFC considers tokenized securities as conventional securities with a tokenization layer. As a outcome, the precise authorized and regulatory necessities that apply to traditional securities markets additionally apply to tokenized securities.
The regulator specified that tokenized securities choices should adhere to the Companies Ordinance’s Prospectus Regime and the Securities and Futures Ordinance on presents of funding. Additionally, intermediaries offering recommendation on tokenized securities, managing tokenized funds, and facilitating secondary market buying and selling on digital asset buying and selling platforms should adjust to the present conduct necessities for securities-related actions.
The current steering from the regulator coincides with Hong Kong’s exploration of tokenization. In February, the Hong Kong Monetary Authority issued the world’s inaugural tokenized green bond, elevating roughly $100 million.
The round additionally states that buying and selling platforms with licenses should set up SFC-approved compensation preparations to safeguard in opposition to potential safety token losses. To illustrate, operators of cryptocurrency buying and selling platforms can present their adoption of protecting measures like switch restrictions or whitelisting to make sure the safety of tokenized securities.
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Conversations about tokenization have not too long ago surged, and the SFC famous a heightened interest from monetary establishments in tokenizing conventional monetary devices inside world monetary markets.
The regulatory physique clarified that it has been reviewing completely different ideas relating to tokenizing funding merchandise, together with these associated to the first providing and secondary buying and selling of tokenized merchandise on SFC-licensed digital asset buying and selling platforms. It added:
“The SFC sees the potential benefits of tokenization to the financial markets, particularly in increasing efficiency, enhancing transparency, reducing settlement time and lowering costs for traditional finance, but it is also aware of the new risks arising from using this technology.”
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