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ARTICLE · 08 JANUARY 2024

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SFC Circular On Intermediaries Engaging In Tokenized Securities Activities (Part 1)

K&L Gates
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On 2 November 2023, Hong Kong's Securities and Futures Commission (SFC) issued a circular addressing the participation of intermediaries in tokenized securities-related activities (the Circular).

Hong KongTechnology
K&L Gates
K&L Gates

On 2 November 2023, Hong Kong's Securities and Futures Commission (SFC) issued a circular addressing the participation of intermediaries in tokenized securities-related activities (the Circular). The move was timely, as we are seeing a growing interest among financial institutions in tokenizing traditional financial instruments in global financial markets.

The Circular supersedes the SFC's 2019 Statement on Security Token Offerings (2019 Statement) and clarifies the meaning of tokenized and digital securities.

Meaning of Tokenized Securities under the Circular

Tokenization involves recording ownership claims on assets that exist on a traditional ledger onto a programmable platform, often utilizing distributed ledger technology (DLT). The Circular indicates that the process of tokenization may offer potential benefits for financial markets, such as increased efficiency, enhanced transparency, reduced settlement time, and lower costs. In addition, tokenization

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