Hong Kong’s security token offering Regulation

Securities Token Offerings Becoming a New Trend

While cryptocurrency market has been suffering, the first regulatory framework for virtual assets was set out in Hong Kong.


The Securities Regulatory Commission (SFC) announced in early November a new approach aiming at bringing virtual asset portfolio managers and distributors of virtual asset funds under its regulatory net, as well as a conceptual framework for the potential regulation of virtual asset trading platforms.


According to the announcement, only virtual asset portfolio managemers that intend to invest 10% or more of their total assets under management in virtual assets must be monitored by the SFC. Distributors of virtual asset funds are also required to obtain relevant licenses.


As for the conceptual framework, the SFC will observe the operation of the virtual asset trading platform in the sandbox and grant relevant licenses to the appropriate crypto exchanges in accordance with the feasibility of the platform.


As long as individuals or enterprises hold related SFC licenses under current legal framework, such as type 1, 4, and 9, they can engage in the above-mentioned activities. And, all virtual assets that meet the definitions of ‘securities’ and ‘futures’ should be regulated by the SFC.


Although the new rules are directed at virtual assets, with no separate rules for security token offerings (STOs) or security tokens, they have more or less showed the watchdog’s attitude on crypto assets, resulting in a potential positive influence on the ‘more regulated’ STO.


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