Hong Kong’s securities regulator has warned investors to be aware of the risks associated with non-fundable tokens (NFTs). The regulator also advised investors to consider investing in NFTs only if they fully understand the risks.
NFTs “move between collectibles and financial assets”
Hong Kong regulators have stated that NFTs face risks associated with other virtual assets and investors should not invest in these assets if they do not fully understand such risks.
According to areportby Interface News, the Hong Kong Securities Regulatory Commission (HKSRC) said these risks include lack of liquidity in secondary markets, unstable prices, lack of transparency in NFT pricing, and hacking risks They state.
The regulator’s warning came after the HKSRC said it observed that some NFTs had unique characteristics. In explaining this, the report stated that ” Some NFTs straddle the line between collectibles and financial assets, such as subdivisions or homogenizations with structures similar to securities, particularly interests under ‘collective investment schemes’ that shape NFTs.”
The report further states that if an NFT is deemed to “constitute an interest under a collective investment scheme,” its marketing and distribution may constitute a “regulated activity.” According to the regulator, persons engaging in such regulated activities must obtain a license.
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