Hong Kong Monetary Authority Sets Regulatory Standards for Tokenized Products

The Hong Kong Monetary 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 Monetary 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 shoppers. 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 belongings digitally represented utilizing distributed ledger know-how (DLT) or related applied sciences. The scope of this round doesn’t lengthen to tokenized merchandise which are regulated beneath 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 business’s initiatives within the realm of tokenization, acknowledging the progress made to this point. The regulatory requirements outlined within the round are aimed toward offering clear tips for the banking sector to foster innovation in tokenization whereas implementing acceptable measures to safeguard customers and traders.

Key elements coated within the round embrace 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 offered 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 supplied within the round embrace the distribution of tokenized structured funding merchandise not regulated beneath 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 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 determine ample techniques and management measures to make sure compliance with all relevant rules and to implement acceptable 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 customers and maintains the integrity of the monetary system.

Licensed establishments with queries concerning the round are inspired to contact designated HKMA representatives for additional steering. The HKMA will proceed to watch the regulatory surroundings and world developments within the tokenization market, offering additional steering to licensed establishments as crucial.

Picture supply: Shutterstock

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