This week, Hong Kong regulators jointly met with operators in the security token sector to encourage Hong Kong as a fintech destination for compliant security token offerings (STOs). To date, just one platform has been licensed, OSL, which issued its own security token in July.
The regulators learned that there’s a pipeline of ten issuers interested in proceeding with blockchain-based securities issuances.
The joint regulatory move was by the Hong Kong treasury department, the Securities and Futures Commission (SFC) and Invest Hong Kong (InvestHK). Fintechs interested in getting involved in security token offerings (STOs) were encouraged to engage with the SFC.
“We support the sustainable development of STO business in Hong Kong that meets the relevant regulatory and compliance requirements, particularly on ensuring investor protection and addressing the risk on the anti-money laundering/combating of terrorist-financing aspect,” said Joseph Chan, Under Secretary for Financial Services and the Treasury.
For securities, Hong Kong has two licenses, one for dealing in securities and the other for automated trading services. New anti-money laundering rules are creating a mandatory licensing regime from March 2023 for cryptocurrency-focused virtual asset exchanges.
The Hong Kong Monetary Authority is also exploring tokenized green bonds.
Various jurisdictions have provided greater legal clarity for security tokens and digital securities. In Asia, Hong Kong wants to join Singapore and Japan, which have moderate security token activity. In Europe, France, Germany and Luxembourg have greater regulatory clarity, and the EU is launching the DLT Pilot regime across the union. The UK has similar plans, and many security tokens have already been issued in the United States, complying with existing regulations.