According to Cointelegraph: In response to growing market demand, the Hong Kong Securities and Futures Commission (SFC) has issued guidelines for businesses looking to offer tokenized securities and other investment products. These recommendations were outlined in a circular released on Nov. 2.
The increasing appetite for tokenized investment products, coupled with the benefits blockchain technology offers, has prompted the SFC to establish publicly accessible guidelines for tokenizing securities and futures markets. The 12-point circular places a particular emphasis on tokenization arrangements, disclosure, intermediaries, and staff competence for businesses involved in tokenized securities-related activities.
The SFC said the push towards tokenizing government-authorized investment products is in line with growing market demand and the government's commitment to fostering market development. If the product in question meets all the relevant authorization requirements, as well as additional safeguards to mitigate associated risks, the commission will permit primary dealing of tokenized SFC-authorized investment products.
"Product Providers should not use public-permissionless blockchain networks without additional and proper controls," the SFC stated. Providers must also assume complete responsibility for their tokenized products, maintain effective record-keeping, and demonstrate operational robustness, among other things.
As for disclosure requirements, providers have to explicitly specify whether settlements are conducted on-chain or off-chain, and must always verify token ownership. Additionally, the SFC stipulates providers must employ at least one competent staff member with relevant experience and expertise to manage the tokenization arrangement and appropriately handle new risks related to ownership and technology.
Despite these regulatory efforts, interest in cryptocurrency has declined among locals in Hong Kong, potentially influenced by the reported $166-million JPEX scandal. A survey by the Hong Kong University of Science and Technology's business school showed that out of 5,700 respondents, 41% would rather not hold digital assets.