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Hong Kong’s securities regulatory authority has issued two circulars to manage digital asset tokenization in its pursuit of changing into a distinguished Web3 hub in Asia.
The Securities and Futures Fee (SFC), in these circulars, provided directions to intermediaries collaborating in tokenized securities actions and outlined the factors for tokenizing funding merchandise licensed by the SFC.
The SFC considers tokenized securities as conventional securities with a tokenization layer. In consequence, the precise authorized and regulatory necessities that apply to traditional securities markets additionally pertain to tokenized securities.
The regulator specified that tokenized securities choices should adhere to the Firms Ordinance’s prospectus regime and the Securities and Futures Ordinance’s affords of investments regime. Moreover, intermediaries offering recommendation on tokenized securities, managing tokenized funds, and facilitating secondary market buying and selling on digital asset buying and selling platforms should adjust to the prevailing conduct necessities for securities-related actions.
The latest steerage from the regulator coincides with Hong Kong’s exploration of tokenization. In February, the Hong Kong Financial Authority, performing because the de facto central financial institution, issued the world’s inaugural tokenized inexperienced bond, efficiently elevating roughly $100 million.
Based on the round, buying and selling platforms with licenses should set up SFC-approved compensation preparations to safeguard towards potential safety token losses. As an example, operators of cryptocurrency buying and selling platforms can present their adoption of protecting measures like switch restrictions or whitelisting to make sure the safety of tokenized securities.
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Conversations about tokenization have not too long ago surged, and the SFC famous a heightened curiosity from monetary establishments in tokenizing conventional monetary devices throughout the world monetary markets.
The regulatory physique clarified that it has been reviewing completely different strategies concerning tokenizing SFC-authorized funding merchandise, together with these associated to the first providing and secondary buying and selling of tokenized merchandise on SFC-licensed digital asset buying and selling platforms. It added:
“The SFC sees the potential advantages of tokenization to the monetary markets, significantly in rising effectivity, enhancing transparency, decreasing settlement time and decreasing prices for conventional finance, however it is usually conscious of the brand new dangers arising from utilizing this expertise.”
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