BLOCKCHAIN LAW GROUP

Where Technology Meets Law
Hong Kong makes a statement in Initial Coin Offerings (ICO)
Following the United States and other countries, the authorities of Hong Kong made a statement on the Initial Coin Offering (ICO) today. In its statement, the Securities and Futures Commission (SFC) explains that some tokens issued as the result of the ICO could be securities in Hong Kong depending on the circumstances.

The statement is similar to the one issued by the SEC of the United States following the investigation of The DAO. However, the SFC explains in greater details what type of tokens could be considered securities. For instance, tokens that provide equity or ownership interest in a company may be considered “shares” and tokens that are creating or acknowledging the debt or liability owed by the company may be considered a “debenture.” The tokens can also be regarded as a “collective investment scheme” (CIS) when token sale proceeds are used by the company to invest in projects for the purpose of providing token holders with a share of the project’s returns.

The statement also warns that the sale of tokens-securities, dealing in or advertising such tokens not only by the Hong Kong companies but also to the Hong Kong public must be regulated by the Hong Kong authorities according to the local securities laws. Such activities are regulated and require license or registration in Hong Kong.

In the same time, the SFC indicates that virtual commodity itself is not a security. Therefore, a correct structuring of tokens makes a significant difference in how the sale of tokens will be regulated in Hong Kong as well as in all other countries under their securities laws.



Summarized by Katrina Arden
Attorney and founder of Blockchain Law Group
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