The Hong Kong Securities and Futures Commission (SFC) has recently reiterated in a press release that STOs (Security Token Offerings) have to be treated as securities and that they must, therefore, be regulated in accordance with the rules in force.
STOs refer to Offerings involving traditional assets (gold, real estate, economic rights – shares) and the Security Tokens issued through them represent the ownership of the asset in digital form.
According to many countries, including China, security tokens are considered for all purposes to be equity securities, with exceptions, and any person selling or distributing security tokens in Hong Kong or involving a Hong Kong investor needs a license or a Type 1 registration with the SFO (Securities and Futures Ordinance). In addition, the press release clarifies that any activity concerning security tokens carried out without the necessary licence will be considered a criminal act.
As explained in the press release, in fact:
In addition, the Chinese press release also reads a warning to investors about potential volatility risks involving virtual assets, lack of transparency, hacking attempts and fraud, risks that are also applicable to Security Token Offerings.
Security Tokens and Regulation
The debate on STOs and their regulation is still open because, while clear and effective regulation could help protect investors from potential losses, stringent regulation could induce companies to find more favourable markets, leaving the country impoverished in that respect.