Hong Kong Regulator Warns of Securitization Risks for NFTs
The Securities and Futures Commission (SFC) of Hong Kong recently issued a statement on the financial and legal risks surrounding non-fungible tokens (NFTs). It claims that such tokens are not only prone to the typical security vulnerabilities of crypto, but could also constitute financial assets bound by SFC regulation.
According to the regulator’s statement on Monday, NFTs “generally” do not fall under the SFC’s regulatory purview. These include NFTs created as “genuine” digital representations of collectibles, such as digital images, artwork, music, and videos. However, the commission claims that there are other NFTs that “cross the boundary” between collectibles and financial assets. Some, for example, are “fractionalized” or “fungible”, causing them to resemble securities and/or collective investment schemes (CIS).
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