Where the digital tokens involved in an ICO fall under the definition of “securities”, dealing in or advising on the digital tokens, or managing or marketing a fund investing in such digital tokens, may constitute a “regulated activity”. Parties engaging in a “regulated activity” are required to be licensed by or registered with the SFC irrespective of whether the parties involved are located in Hong Kong, so long as such business activities target the Hong Kong public.

Where an ICO involves an offer to the Hong Kong public to acquire “securities” or participate in a CIS, registration or authorization requirements under the law may be triggered unless an exemption applies. Parties engaging in the secondary trading of such tokens (eg, on cryptocurrency exchanges) may also be subject to the SFC’s licensing and conduct requirements. Certain requirements relating to automated trading services and recognized exchange companies may be applicable to the business activities of cryptocurrency exchanges.’

For further reading, please refer to ‘Securities and Futures Ordinance of Hong Kong’(SFO).

• ’Regulated activities’ are specified in Schedule 5 of Part I in SFO.

  • For registration: Part II and Part XII of the Companies Ordinance in SFO
  • For authorization: Part IV in SFO
  • For regulations related to exchanges and automated trading services: Part III in SFO.

Sources

• Statement on initial coin offerings, Securities and Futures Commission
• Securities and Futures Ordinance of Hong Kong