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Authored by: Su Cheen Chuah and Mary Nieto
Hong Kong’s Securities and Futures Commission (SFC) recently issued a warning to investors about the risks associated with non-fungible tokens (NFTs).
In addition to reminding investors about the various risks involved in investing in NFTs and other virtual assets, the SFC also reminded market participants that NFTs may, depending on their structure, constitute “securities” or interests in a “collective investment scheme” (CIS), both as defined in the Securities and Futures Ordinance (SFO).
When marketing or distributing an NFT in Hong Kong, the two main issues that need to be considered from a securities regulatory perspective are:
The SFC has established a dedicated area of its website to provide information for businesses which intend to conduct regulated activities involving virtual assets: SFC Fintech Contact Point
For a summary of the joint circular issued by the SFC and the Hong Kong Monetary Authority on 28 January 2022 on the distribution of virtual asset-related products, the provision of virtual asset dealing services and the provision of virtual asset advisory services, please see: Changes to the requirements for virtual asset-related activities
For a brief overview of other legal issues, such as intellectual property rights, in relation to NFTs, please see: Trading NFTs? A few legal reminders
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