Hong Kong Regulator Issues Official Guidance for STOs

April 24, 2019

Hong Kong’s Securities and Futures Commission (SFC) has issued official guidance on security token offerings (STOs), with the intention of clarifying the legal and regulatory requirements for parties engaging in STO-related activities, reported by Cointelegraph.

The securities regulator said security tokens are “likely to be securities” under the island’s Securities and Futures Ordinance, thereby falling under existing securities laws. This, in turn, indicates that STOs based in Hong Kong or targeting Hong Kong investors are required to obtain a license and register to deal in securities in accordance with the provisions of the ordinance unless otherwise exempted.

The SFC classifies engaging in securities dealing known as a “Type 1 regulated activity” without a license as a criminal offense. Additionally, intermediaries seeking to market or operate STOs must comply with the existing Code of Conduct for entities licensed or registered with the commission.

Finally, the SFC says prospective operators must observe guidance previously outlined in a November 2018 circular for crypto exchanges and intermediaries engaging in the distribution of virtual asset funds.

Three points were stipulated in the guidance:

  1. They are required to observe license and registration requirements, along with STO sales being restricted explicitly to professional investors.
  2. Intermediaries are required to conduct due diligence in developing a comprehensive understanding of STOs, while also being tasked with making sure any data provided to investors is sound and credible.
  3. They must provide investors with transparent information and issue warnings outlining the risks involved with virtual asset investments.

Meanwhile in the United States, lawmakers as well as crypto industry figures have called on the U.S. Securities and Exchange Commission to provide more regulatory clarity when it comes to blockchain-based tokens.\

Source: cointelegraph.com

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