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 danger administration.
The Hong Kong Financial Authority (HKMA) has issued a brand new round detailing the regulatory requirements licensed establishments should adhere to when promoting and distributing tokenized merchandise (cryptocurrency, digital asset) to purchasers. This transfer marks a major 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, seek advice from real-world property digitally represented utilizing distributed ledger expertise (DLT) or related applied sciences. The scope of this round doesn’t lengthen to tokenized merchandise which might be regulated beneath the Securities and Futures Ordinance or these topic to the laws and tips issued by the Securities and Futures Fee (SFC) and the HKMA.
The HKMA has expressed its assist for the trade’s initiatives within the realm of tokenization, acknowledging the progress made to date. The regulatory requirements outlined within the round are geared toward offering clear tips for the banking sector to foster innovation in tokenization whereas implementing applicable measures to safeguard shoppers and traders.
Key elements lined within the round embody normal ideas that present regulatory necessities and shopper/investor safety measures relevant to the sale and distribution of a product additionally apply when the product is offered and distributed in a tokenized type. It’s because the phrases, options, and dangers related to the tokenized merchandise (excluding dangers particularly arising from tokenization) are just like these of associated merchandise.
Particular examples offered within the round embody the distribution of tokenized structured funding merchandise not regulated beneath the Securities and Futures Ordinance and tokenized gold, which ought to comply with the identical regulatory necessities and investor safety measures as their non-tokenized counterparts.
The HKMA’s round additionally emphasizes the necessity for licensed 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 programs and management measures to make sure compliance with all relevant laws and to implement applicable inner management measures to deal with the particular dangers and distinctive nature of tokenized merchandise.
The round represents a proactive strategy by the HKMA to control rising applied sciences within the monetary sector, guaranteeing that the advantages of innovation are realized in a way that protects shoppers and maintains the integrity of the monetary system.
Licensed establishments with queries relating to the round are inspired to contact designated HKMA representatives for additional steering. The HKMA will proceed to watch the regulatory setting and international developments within the tokenization market, offering additional steering to licensed establishments as obligatory.
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