Hong Kong will issue asset-token regulations as interest rates rise.
The Hong Kong Securities and Futures Commission (SFC) has issued two circulars to regulate digital asset tokens.
The circulars provide guidance to intermediaries involved in tokenized securities activities and outline the requirements for tokenization of investment products authorized by the SFC.
The SFC considers tokenized securities as traditional securities with a tokenization layer. As a result, the same legal and regulatory requirements that apply to conventional securities markets also apply to tokenized securities.
The regulator has stated that tokenized securities offerings must comply with the Companies Ordinance's prospectus regime and securities and futures regulations on investment offerings. In addition, intermediaries providing advice on tokenized securities, managing tokenized funds, and facilitating secondary market transactions on virtual asset trading platforms must comply with ethical requirements for securities-related activities.
A recent directive from the administrator is related to the Hong Kong token search. In February, the Hong Kong Monetary Authority raised nearly $100 million and issued the world's first tokenized green bond.
The circular also states that licensed trading platforms must establish indemnification arrangements approved by the SFC and protect against potential loss of security tokens. To illustrate, operators of cryptocurrency trading platforms can demonstrate that they have adopted safeguards such as transfer limits or authorized safeguards to ensure the security of token securities.
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Talks about tokenization have increased recently, and the interest of financial institutions to introduce SFC traditional financial instruments in international financial markets has increased.
The regulator said it has been reviewing various proposals regarding the introduction of investment products, including those related to the primary offering and secondary trading of tokenized products on SFC-licensed virtual asset trading platforms. He added:
“The SFC sees the benefits that tokenization can bring to financial markets, particularly by increasing efficiency, increasing transparency, reducing settlement times and reducing costs for traditional finance.
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