SFC issues a warning statement on unregulated virtual asset platforms

On 16 July 2021, the Securities and Futures Commission (“SFC”) issued a warning statement concerning virtual asset platforms. In the warning statement, the SFC highlighted their awareness that Binance may offer trading services in “stock tokens” in Hong Kong, and that no entity in the Binance group is licensed or registered to conduct any “regulated activity” in Hong Kong.

According to the SFC’s warning statement, stock tokens are virtual assets that are represented to be backed by different depository portfolios of underlying overseas listed stocks, with their prices closely tracking the performance of the respective stocks. As stock tokens can be denominated in factional units, they are promoted as an alternative means for investors to purchase fractional shares instead of the entire fully paid-up shares.

Although there is uncertainty as to whether stock tokens fall within the definition of “securities” under the Securities and Futures Ordinance, the SFC expressed their view in the warning statement that stock tokens are likely to be “securities” and thus within their regulatory remit. This means that unless a person is licenced by the SFC (or unless an applicable exemption applies), any person who offers stock tokens or the trading of stock tokens to the Hong Kong public may be criminally liable.

See here for the full warning statement issued by the SFC.

22 July 2021
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