Crypto projects who want to conduct security token offerings (STOs) in Hong Kong now have new rules to guide such issuance of cryptocurrencies.
On March 28, the Hong Kong Securities and Futures Commission (SFC) released a statement that it says will serve as a reminder to parties who are engaging in security token offerings, namely, the issuing company, intermediaries and investors.
Here is a summary of the statement regarding STO regulation in Hong Kong:
The regulatory body provided a definition for STOs labeling it as — “offerings which are structured to have features of traditional securities offerings, and involve Security Tokens which are digital representations of ownership of assets (eg, gold or real estate) or economic rights (eg, a share of profits or revenue) utilizing blockchain technology.”
Given that STOs are likely to be “securities,” the statement noted that the regulators would apply existing securities laws to the new fundraising model and also that it will mainly be sold to professional investors.
Entities conducting STOs in Hong Kong will obtain a license for the SFC in line with existing laws except in rare cases where an exemption applies to the offering. Failing to do so is a criminal offense according to the guideline.
Intermediaries who market a security token should also comply with legal and regulatory requirements for doing so, which includes additional investor protection measures.
The intermediaries also have to conduct extensive research into the project issuing the STO before bringing it to the market. Information gathered during this process should be presented in a clear and understandable way to potential investors.
Investors on their part are warned that investing in cryptocurrencies and of course STOs poses a great risk, therefore they should be cautious before deciding whether to invest.
By releasing the new regulation for ICOs, Hong Kong has become the second region to do so in the last couple of months. In February, the Philippines released an STO regulatory framework while the Thai Parliament also approved securities tokenization for local companies.
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