Hong Kong's Securities and Futures Commission (SFC) sad it will start treating tokenised securities in the same way as traditional securities.

The regulator has issued two circulars offering instructions to intermediaries involved in tokenised securities activities and defining the criteria for tokenising SFC-authorized investment products.

It specified that tokenised securities must adhere to the Companies Ordinance’s prospectus regime and the Securities and Futures Ordinance’s offers of investments regime.

“The SFC is of the view that it is appropriate to allow primary dealing of tokenised SFC-authorised investment products, as long as the underlying product can meet all the applicable product authorisation requirements and the additional safeguards to address the new risks associated with the tokenisation arrangement,” one of the announcements read.

Additionally, intermediaries providing advice on tokenised securities, managing tokenised funds, and facilitating secondary market trading on virtual asset trading platforms must comply with the existing conduct requirements related to securities.

The move aligns with Hong Kong’s recent exploration of tokenisation, with the Hong Kong Monetary Authority issuing the world’s first tokenized green bond in February, raising an estimated $US100 million.

Cryptocurrency trading platforms have been given the go signal to adopt protective measures like transfer restrictions or whitelisting to safeguard the security of tokenised securities.

The regulator has noted a recent surge in interest from financial institutions in tokenising traditional financial instruments within global financial markets, with Hong Kong taking interest as it positions itself as a next digital asset hub.