On Monday, Hong Kong’s Securities and Futures Fee (SFC) launched an announcement warning buyers in regards to the dangers of nonfungible tokens, or NFTs, which have soared in recognition lately. The regulatory physique wrote:
“As with different digital property, NFTs are uncovered to heightened dangers, together with illiquid secondary markets, volatility, opaque pricing, hacking and fraud. Buyers needs to be aware of those dangers, and if they can’t absolutely perceive them and bear the potential losses, they need to not put money into NFTs.”
Nonetheless, it seems that the SFC’s particular concern lies within the securitization of NFTs. “The vast majority of NFTs noticed by the SFC are supposed to symbolize a novel copy of an underlying asset comparable to a digital picture, paintings, music or video,” which don’t require regulation by the SFC.
However property that push the boundary between collectibles and monetary property, comparable to fractionalized or fungible NFTs structured as securities or collective funding schemes (CIS) in NFTs, do fall underneath the SFC’s mandate. The solicitation of Hong Kong residents by corporations engaged in these actions require the issuer to acquire a license from the SFC except an exemption applies.
CIS has not too long ago gained traction as they current a believable answer for particular person buyers to acquire fractional possession of real-life collectibles that might be in any other case too cost-prohibitive for any single get together. But, questions persist as as to whether such funding constructions represent securitization.
One latest effort launched by the Royal Museum of Positive Arts Antwerp (KMSKA) to tokenize a million-euro traditional portray on the blockchain was performed by way of debt securitization. The enterprise met regulatory necessities by way of assistance from blockchain entities Rubey and Tokeny.
The journalist is a writer and digital nomad. Loves thinking, learning, and writing about all things Web3, particularly its impact on major creative industries.