Hong Kong Regulator Says Initial Coin Offerings May Involve "Securities"

The list of regulators signaling that initial coin offerings, or "ICOs," may involve securities is growing on an international scale. As previously discussed here and here, regulators in the U.S. and Canada, respectively, have already announced that they may consider certain cryptocurrency tokens sold in ICOs to be "securities," subject to regulation under applicable securities laws. This week, in response to "an increase in the use of [ICOs] to raise funds in Hong Kong and elsewhere," regulators in Hong Kong have issued a similar warning.

In its "Statement on initial coin offerings," the Securities and Futures Commission ("SFC") stated that "digital tokens that are offered or sold [in ICOs] may be 'securities,'" and therefore subject to the securities laws of Hong Kong. The SFC called out three types of arrangements under which, in its view, the issuance of digital tokens could be considered a security. The first type is where tokens "represent equity or ownership