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Hong Kong’s Securities and Futures Commission (SFC) has issued two circulars to regulate digital asset tokenization, as the city aims to become a leading Web3 hub in Asia. The circulars provide instructions to intermediaries involved in tokenized securities activities and outline the criteria for tokenizing investment products authorized by the SFC. The SFC considers tokenized securities as traditional securities with a tokenization layer, subjecting them to the same legal and regulatory requirements as conventional securities. Tokenized securities offerings must adhere to the Companies Ordinance’s prospectus regime and the Securities and Futures Ordinance’s offers of investments regime. Intermediaries providing advice on tokenized securities, managing tokenized funds, and facilitating secondary market trading on virtual asset trading platforms must comply with existing conduct requirements for securities-related activities. The SFC’s recent guidance aligns with Hong Kong’s exploration of tokenization, highlighted by the issuance of the world’s inaugural tokenized green bond by the Hong Kong Monetary Authority. Trading platforms with licenses must establish SFC-approved compensation arrangements to protect against potential security token losses. The SFC has been reviewing suggestions regarding tokenizing SFC-authorized investment products, including primary offerings and secondary trading on SFC-licensed virtual asset trading platforms. While recognizing the potential benefits of tokenization in increasing efficiency, transparency, and reducing costs in traditional finance, the SFC is also aware of the new risks associated with this technology.

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Information	Details
Geography	Asia
Countries	🇭🇰
Sentiment	positive
Relevance Score	1
People	None
Companies	Hong Kong Monetary Authority, Securities and Futures Commission, Securities and Futures Ordinance, Companies Ordinance, JPEX
Currencies	None
Securities	None