Hong Kong's SFC Issues Guidelines for Tokenized Securities Amid Dwindling Cryptocurrency Interest
Summary:
The Hong Kong Securities and Futures Commission (SFC) has released guidelines for businesses dealing with tokenized securities and other investment products, discussing key factors such as tokenization procedures, disclosure, intermediaries, and staff competencies. The move, responding to the rising market demand and government's intent to encourage market growth, allows primary trading of tokenized SFC-approved products. However, public interest in cryptocurrency has dropped significantly due to a recent scandal involving JPEx.
On November 2, the Hong Kong Securities and Futures Commission (SFC) unveiled guidelines for businesses dealing with tokenized securities and other investment products. This step was prompted by the surging demand for tokenized investments and the various benefits of blockchain technology in Hong Kong. In the wake of China's central financial work conference, these guidelines represent a strategic move towards high-quality financial development.
The comprehensive circular outlines 12 factors, focusing on four key areas – tokenization procedures, disclosure, intermediaries, and staff competencies – to qualify for tokenized, securities-related operations. The push to tokenize SFC-approved investment products stems from the increasing market demand and government's intent to nurture market growth. Provided the product meets all relevant authorization requirements and additional safeguards, the SFC affirms that primary trading of tokenized investments is permissible.
The circular stipulates that providers must assume full accountability for their tokenized offerings, ensure robust record-keeping, possess a high-risk tolerance, and maintain operational integrity among other considerations. On the subject of public-permissionless blockchain networks, the SFC insists on additional controls. Disclosure rules require providers to specify whether settlements occur off-chain or on-chain and ensure token ownership is ascertainable at all times. Additionally, providers are required to employ at least one staff member with the requisite expertise to supervise tokenization arrangements and manage associated risks aptly.
However, despite these progressive steps, interest in cryptocurrency among Hong Kong locals has seen a downturn, largely due to the recent JPEX scandal. Research by The Hong Kong University of Science and Technology’s business school indicates that the alleged $166-million scam has severely dented confidence in digital assets. Of the 5,700 survey respondents, nearly 41% stated they would rather not hold virtual assets.
Published At
11/6/2023 10:39:31 AM
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