Non-fungible tokens (NFTs) can be regulated if they represent similar characteristics to securities, particularly in the category of “collective investment schemes,” Hong Kong’s Securities and Futures Commission (SFC) said on Monday

See related article: Hong Kong retail investors blocked from Bitcoin spot ETFs

Fast facts

  • According to the SFC, a “collective investment scheme” is an investment arrangement where investors pool money for a certain property which is managed by an escrow.
  • The investors benefit from the investment but do not have active control over the asset.
  • Only licensed or exempted institutions can operate collective investment schemes, the SFC said.
  • Fractionalized NFTs represent shared ownership in NFTs, which can be split into millions of fungible tokens by locking them in a vault on a decentralized platform.
  • The SFC placed “fungible NFTs” under the same criteria, which are assets that can be compared to tokens associated with specific NFT collections or projects.
  • The market watchdog added that an NFT asset does not fall under the SFC’s purview if the asset represents a unique version of an electronic image, artwork, music or video. 

See related article: Hong Kong to propose bill to license crypto exchanges