More than a handful of Token issuance companies, according to a Hong Kong government official, have expressed a strong interest in security token offerings. The government is dedicated to fostering the steady advancement of financial technology, including security token offerings.
The Treasury Seeks to Enhance STO Growth
To support the growth of the Hong Kong Security Token Offering (STO), the Securities and Futures Commission, Invest Hong Kong, and the Hong Kong Financial Services and Treasury Bureau convened on September 19 and exchanged information with the security token issuance industry.
The Treasury Bureau’s deputy director, Chen Haolian, noted that Hong Kong had previously issued security tokens. More than a dozen potential token issuers expressed interest in issuing security tokens at the meeting held last week, underscoring the government’s commitment to helping Hong Kong’s Fintech industry, which includes issuing security tokens.
In order to support the growth of the real economy and provide the society with a wide range of innovative financial services, he claimed that the SAR government supports the development of financial technology. He also said that the government supports the issuance of security tokens in accordance with the requirements for ensuring investor protection and countering money laundering and terrorist financing. Hong Kong’s sustainable development is subject to all applicable laws and regulations.
The SFC’s support for the virtual asset sector, particularly the use of distributed ledger technology to issue securities, which will help improve efficiency, transparency, and lower costs, was also expressed by Huang Lexin, Director of the Licensing Section of the SFC’s Intermediary Department and Head of the Fintech Group.
Tokenization May Transform Hong Kong’s Fixed Income Market
The effectiveness and dependability of token issuers are two major benefits. Many tasks now carried out by a company secretariat, including as investor announcements, investor registration management, and coupon and principal payments, can be programmed into tokens by issuers. This is economical, effective, and may lessen the possibility of neglect, fraud, and human error.
Fixed income products are a good candidate for tokenization since they have established deadlines for principle repayment and coupon payments. Smart contracts can be programmed with such dates and sums in advance, and when specific criteria are met, they will execute automatically.
Investors can profit from tokenization as well, especially in terms of enhanced liquidity, automation benefits, and due diligence.
Regulatory Developments in Hong Kong
Several financial regulators, notably the Securities and Futures Commission (SFC), the Hong Kong Monetary Authority (HKMA), and the Insurance Authority, have released guidelines on crypto-assets (IA).
At the moment, the regulatory framework governing virtual asset trading platforms (VATP) functions on a “opt-in” basis. By allowing traders to trade at least one security-eligible token on its platform, a centralized VATP can “opt-in” to regulation. A VATP that chooses to participate will need to apply for a license from the SFC, and once granted, will have to abide by certain licensing terms (such as restricting the use of its services to professional investors only) and other conduct guidelines.