Following the Chinese authorities sudden ban the Securities and Futures Commission in Hong Kong issued a statement on initial coin offerings.
The Securities and Futures Commission (SFC) has urged investors to be mindful of potential scams as well as the investment risks involved in initial coin offerings (ICOs).
As ICOs operate online and may not have a presence in Hong Kong, investors may be exposed to heightened risks of fraud the regulator warned.
Licence Requirement
The statement explains that depending on the facts and circumstances of an initial coin offering (ICO), digital tokens that are offered or sold may be «securities» as defined in the Securities and Futures Ordinance, and accordingly subject to the securities laws of Hong Kong.
Where the digital tokens involved in an ICO fall under the definition of securities, dealing in or advising on such digital tokens, or managing or marketing a fund investing in them, may constitute a regulated activity.
Concerns Growing in Asia
Parties engaging in a regulated activity targeting the Hong Kong public are required to be licensed by or registered with the SFC, irrespective of where they are located.
«We are concerned about an increase in the use of ICOs to raise funds in Hong Kong and elsewhere,» said Julia Leung, the SFC’s Executive Director of Intermediaries.
«Those involved in an ICO need to be aware that some ICO structures may be subject to Hong Kong securities laws,» added Leung.
Chinese Action
The People's Bank of China announced an immediate ban on initial coin offerings and declared them illegal and a threat to financial stability.
In a circular published on its website, the People’s Bank of China (PBOC) said fundraising schemes of this kind had been defined as illegal, and that 90 percent of the initial coin offerings (ICOs) launched in the country were found to have been fraudulent.
