November 6, 2023
By Sharan Kaur Phillora
In a significant move towards embracing blockchain technology and virtual assets, Hong Kong’s Securities and Futures Commission (SFC) has provided guidelines to facilitate the primary dealing of tokenized securities, aligning with the region’s broader objective to establish itself as a virtual asset hub.
Here’s what we know:
The SFC has clarified that tokenized securities traded within Hong Kong will be subjected to regulatory frameworks like traditional securities. The commission also outlined specific requirements for both product suppliers and intermediaries involved in these tokenized products, with a focus on ensuring investor protection during public sales of these securities.
This development reflects Hong Kong’s growing recognition of the efficiency, transparency, and cost-effectiveness that tokenization can bring to traditional finance, especially after successfully issuing a $100 million tokenized green bond by its central bank.
This initiative shifts from Hong Kong’s earlier stance, where security tokens were deemed “complex products,” necessitating additional investor protection measures. The updated regulations allow for primary dealings in tokenized SFC-authorised investment products, provided they adhere to all applicable authorization requirements and safeguards to address the new risks associated with tokenization.
By opening up to tokenized securities, Hong Kong is gradually building its reputation as a Web3 hub in Asia, following up on recent regulatory updates that now permit crypto trading platforms to serve retail customers under a new licensing regime.
This shift not only fosters innovation in blockchain-based financial products but also potentially attracts more global fintech enterprises to operate in the region, contributing to Hong Kong’s goal of becoming a major virtual asset hub.
These guidelines from the SFC are a part of Hong Kong’s larger ambition to align with the global trend of financial digitization, demonstrating a proactive approach towards integrating blockchain technology into its financial ecosystem while ensuring a regulated and secure environment for both investors and operators.
About the author
Sharan Kaur Phillora’s thirst for knowledge has led her to study many different subjects, including NFTs and Blockchain technology – two emerging technologies that will change how we interact with each other in the future. When she isn’t exploring a new idea or concept, she enjoys reading literary masterpieces.