The Securities and Futures Commission (SFC) of Hong Kong recently issued a statement on the financial and legal risks associated with investing with non-fungible tokens (NFTs). Hong Kong Regulator Warns Against NFTs According to a statement on Monday, Hong Kong’s Securities and Futures Commission (SFC) said the NFT market is subject to risks that include “illiquid secondary markets, volatility, opaque pricing, hacking, and fraud.” The regulator said, “Investors should be mindful of these risks, and if they cannot fully understand them and bear the potential losses, they should not invest in NFTs.” However, the regulatory authority also mentioned the instances in which NFTs “crossed the boundary between a collectible and a financial asset.” For example, some NFTs are “fractional” or “convertible”, making them similar to securities and/or collective investment schemes (CIS). The SFC added that in case any NFT collection involves an offer to the Hong Kong public to participate in a CIS, they need the approval of the regulatory authority and fulfill several requirements as well. “Where an NFT is interested in a CIS, its marketing or distribution may constitute a ‘regulated activity’. Parties carrying out regulated activity, whether based in Hong Kong or targeting Hong Kong investors, require a license from the SFC, unless an exemption applies,” the regulator added.The post Investment in NFTs Comes With Risks, Hong Kong Regulator W...
