SFC issues statement on initial coin offerings

5 Sep 2017



The Securities and Futures Commission (SFC) today issued a statement on existing regulations which could be applicable to initial coin offerings (ICOs).

Today’s statement explains that depending on the facts and circumstances of an 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.

ICOs typically involve the issuance of digital tokens, created and disseminated using distributed ledger or blockchain technology. Whilst digital tokens offered in typical ICOs are usually characterised as a “virtual commodity”, the SFC has observed that certain ICOs have terms and features that may mean that the digital tokens are “securities”.

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. 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 Ms 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.”

The SFC urges investors to be mindful of potential scams as well as the investment risks involved in ICOs. As ICOs operate online and may not have a presence in Hong Kong, investors may be exposed to heightened risks of fraud.

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Page last updated : 5 Sep 2017