The wait is over, Hong Kong SFC has revealed its regulation on STO, as a reminder about the legal and regulatory requirements applicable to parties engaging in it.
The statement says, STOs typically refer to specific 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.
Security Tokens are likely to be “securities” under the Securities and Futures Ordinance and so subject to the securities laws of Hong Kong.
Any person who markets and distributes Security Tokens, whether in Hong Kong or targeting Hong Kong investors, unless an applicable exemption applies, are required to be licensed or registered for Type 1 regulated activity.
Without a licence, unless an exemption applies, it is a criminal offense for any person to engage in regulated activities.
Intermediaries which market and distribute Security Tokens, are reminded to discuss with the SFC before engaging in any activities relating to STOs.
As Security Tokens would be regarded as “complex products,” an additional investor protection measure also applies.