Hong Kong’s Securities and Futures Commission approves tokenised securities and regulated funds, aiming to enhance the city’s role as a global virtual asset hub.
In a significant move to solidify its position as a global virtual asset hub, Hong Kong has given the green light to tokenised securities and regulated funds. The city’s Securities and Futures Commission (SFC) unveiled guidelines, aimed at regulated intermediaries like fund managers, facilitating the issuance of tokenised securities. In Hong Kong, these tokenised securities, as defined by the commission, are blockchain-based tokens that represent ownership in an investment product.
The SFC highlighted that tokenisation could enhance product efficiency and reduce operational costs by diminishing reliance on intermediaries. Moreover, it underscored the existing market interest in this innovative financial approach. To maintain the integrity of tokenised funds, the SFC stressed the importance of maintaining proper records and mandated that product providers have at least one staff member with relevant experience for the new setups.
The concept of tokenising real-world assets on the blockchain has gained traction in the financial industry, even among institutions historically sceptical of cryptocurrencies. JP Morgan Chase and Citigroup are among the major financial players that have endorsed this technology, expanding its use beyond the realm of cryptocurrencies.
In a bid to foster its digital asset sector, the Hong Kong government introduced its inaugural tokenised green bonds, valued at US$102,335,280.00, in February 2023. These developments align with the government’s broader efforts to restore Hong Kong’s status as a global business and financial hub.
Hong Kong has embraced cryptocurrencies by allowing retail traders to invest in virtual assets since June, while permitting crypto exchange-traded funds from 2022. These endeavours have been seen as an encouraging signal from Beijing, despite its ban on cryptocurrency transactions within the mainland.
In response to these advancements, Chinese companies have been establishing operations in Hong Kong, keen to partake in the growing opportunities. Concurrently, foreign companies have also explored the option of setting up shop in the city. Currently, the SFC has licensed two crypto exchanges, OSL and Hashkey, exclusively for retail trading in Bitcoin and Ether. Meanwhile, five other companies have submitted applications for licences.
Despite Hong Kong’s proactive stance in this space, the crypto industry faces several challenges. A bear market, a shortage of talent, and the reluctance of traditional financial institutions to collaborate with Web3 companies are among the hurdles it must surmount. However, these recent regulatory moves signify Hong Kong’s determination to remain at the forefront of the global digital asset landscape.
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