Hong Kong Securities and Futures Commission Calls for Regulation of NFTs

The Hong Kong regulator warns investors of risks associated with investing in non-fungible tokens

article-image

Blockworks exclusive art by Axel Rangel

share

key takeaways

  • The agency’s main concern lies in the securitization of NFTs
  • Only licensed institutions can operate collective investment schemes

A Hong Kong Securities and Futures Commission statement published on Monday defines which NFTs fall under its mandate, while advising investors to be mindful of regulated securities.

The statement warned of risks such as “illiquid secondary markets, volatility, opaque pricing, hacking and fraud,” and cautioned that if investors “cannot fully understand them and bear the potential losses, they should not invest in NFTs.”

The Securities and Futures Commission (SFC) is particularly concerned about assets that “push the boundary between a collectible and a financial asset” — those that are structured like a security or a collective investment scheme (CIS). 

A CIS is a type of investment arrangement to pool money around a certain asset or property. The Hong Kong Securities and Futures Ordinance (SFO) specifies that a CIS is managed in escrow, and its participants do not have day-to-day control over its management but are subject to receive profits, income or other returns. 

A recent example includes the Royal Museum of Fine Arts Antwerp’s fractionalization and security token offering on the Polygon blockchain of James Ensor’s 1924 painting “Carnaval de Binche.”

While such fractionalized NFTs (non-fungible tokens) fall under the SFC’s mandate, NFTs of a digital image, artwork, music or video that represent a unique copy of an underlying asset do not.

The financial regulator stated that any Hong Kong residents who wish to issue NFTs or to target local investors must obtain a license from the SFC, or be subject to certain authorization requirements under the SFO.

Recently, Hong Kong also limited the sale of crypto spot ETFs to only professional investors, which it defined as those whose portfolio exceeds 8 million Hong Kong dollars (about $1.2 million). And the Hong Kong Monetary Authority deemed “payments-related stablecoins” as a risk to financial stability.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Unlocked by Template (7).png

Research

Union’s improvements upon Tendermint consensus through CometBLS, coupled with ZK proving through Galois, allow for a broadly scalable, cost efficient, and low latency IBC implementation that is feasibly scalable across every existing blockchain, virtual machine and runtime. The implementation offers modular crosschain interoperability without the need for trusted intermediaries.  

article-image

Kraken’s chief security officer Nick Percoco said the exchange turned the tables on a North Korean hacker

article-image

Or is it approximately the least cypherpunk thing we could do?

article-image

Over 20% of SOL-USD swap volume goes through SolFi

article-image

CEO Vlad Tenev calls expected clarity on listing crypto asset securities “a big opportunity”

article-image

Big Tech pulled US indexes back into the green Thursday, as investors waited for two more Mag 7 first-quarter reports after the bell

article-image

Charts and takeaways from Tuesday’s jobs report and Wednesday’s GDP print, as the economy digests the tariff war