The Hong Kong Securities Commission warns of NFT risks and the regulator’s main concern is the rise of unregulated collective investment schemes that happen in the non-fungible token space so let’s read more about it in today’s latest cryptocurrency news.
The Hong Kong Securities Commission released a statemetn warning investors about risks regarding NFTs or NFTs that soared in value and popularity in the past few months. The regulator wrote:
“As with other virtual assets, NFTs are exposed to heightened risks, including illiquid secondary markets, volatility, opaque pricing, hacking, and fraud. 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, it seems that the SFC speciifc concern lies in the securitization of NFTs and most of the NFTs observed by the SFC represents a unique copy of the underlying asset like a digital image, music, or video which doesn’t require regulation by the SFC. Assets that push the boundaries between collectibles and financial assets like fractionalized NFTs, structured as securities, don’t fall under the SFC mandate and the solicitation of the residents in Hong Kong engaged in the activities and require the issuer to obtain a license from the SFC unless an exemption applies.
The CIS gained traction recently as they present a solution for individual investors to obtain fractional ownership of real-life collectibles which are too expensive for a single party so questions persist as to whether such investment structures constitute securitization. One recent effort by the Royal Museum of Fine Arts Antwerp to tokenize the painting of n the blockchain was conducted via debt securitization and the venture met with the regulatory requirements via the aid of blockchain entities Tokeny and Rubey.
As recently reported, The Samsung asset management will list Asia’s first Blockchain ETF in Hong Kong and will mimic the Amplifi Transformational Data Sharing ETF that includes exposure to Bitcoin. Samsung Asset Management is the largest one in Korea and it plans to list a blockchain-focused ETF in Hong Kong before July. This is the first ETF in Asia that will include actual crypto exposure. As reported by the South Korean business newspaper Hankuyang, the fund will resemble Amplify’s Transformational Data Sharing ETF and the latter invests mainly in crypto-related companies like Galaxy Digital Holdings, Coinbase, and SilverGate capital.
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