The Hong Kong Financial Authority (HKMA) has launched a round outlining regulatory requirements for establishments promoting and distributing tokenized merchandise, aiming to advertise innovation, guarantee shopper and investor safety, and promote due diligence, transparency, and threat administration.
The Hong Kong Financial Authority (HKMA) has issued a brand new round detailing the regulatory requirements approved establishments should adhere to when promoting and distributing tokenized merchandise (cryptocurrency, digital asset) to purchasers. This transfer marks a big step within the regulatory physique’s efforts to embrace technological developments within the monetary sector whereas guaranteeing shopper and investor safety.
Tokenized merchandise, as outlined by the HKMA on this round, discuss with real-world property digitally represented utilizing distributed ledger expertise (DLT) or comparable applied sciences. The scope of this round doesn’t prolong to tokenized merchandise which are regulated underneath the Securities and Futures Ordinance or these topic to the rules and tips issued by the Securities and Futures Fee (SFC) and the HKMA.
The HKMA has expressed its help for the trade’s initiatives within the realm of tokenization, acknowledging the progress made up to now. The regulatory requirements outlined within the round are aimed toward offering clear tips for the banking sector to foster innovation in tokenization whereas implementing applicable measures to safeguard shoppers and buyers.
Key facets coated within the round embody common ideas that current regulatory necessities and shopper/investor safety measures relevant to the sale and distribution of a product additionally apply when the product is bought and distributed in a tokenized kind. It is because the phrases, options, and dangers related to the tokenized merchandise (excluding dangers particularly arising from tokenization) are much like these of associated merchandise.
Particular examples offered within the round embody the distribution of tokenized structured funding merchandise not regulated underneath the Securities and Futures Ordinance and tokenized gold, which ought to observe the identical regulatory necessities and investor safety measures as their non-tokenized counterparts.
The HKMA’s round additionally emphasizes the necessity for approved establishments to carry out due diligence, disclose dangers and product options transparently, and handle dangers related to the sale and distribution of tokenized merchandise successfully. Establishments are anticipated to ascertain ample methods and management measures to make sure compliance with all relevant rules and to implement applicable inside management measures to deal with the particular dangers and distinctive nature of tokenized merchandise.
The round represents a proactive strategy by the HKMA to manage rising applied sciences within the monetary sector, guaranteeing that the advantages of innovation are realized in a fashion that protects shoppers and maintains the integrity of the monetary system.
Approved establishments with queries relating to the round are inspired to contact designated HKMA representatives for additional steerage. The HKMA will proceed to watch the regulatory atmosphere and international developments within the tokenization market, offering additional steerage to approved establishments as crucial.
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