Hong Kong issues rules for asset tokenization as interest mounts
The Securities and Futures Commission (SFC) of Hong Kong has issued two circulars to regulate digital asset tokenization.
The circulars offer instructions to intermediaries participating in tokenized securities activities and outline the criteria for tokenizing investment products authorized by the SFC.
The SFC considers tokenized securities as traditional securities with a tokenization layer. As a result, the exact legal and regulatory requirements that apply to conventional securities markets also apply to tokenized securities.
The regulator specified that tokenized securities offerings must adhere to the Companies Ordinance’s Prospectus Regime and the Securities and Futures Ordinance on offers of investment. Additionally, intermediaries providing advice on tokenized securities, managing tokenized funds, and facilitating secondary market trading on virtual asset trading platforms must comply with the existing conduct requirements for securities-related activities.
The recent guidance from the regulator coincides with Hong Kong’s exploration of tokenization. In February, the Hong Kong Monetary Authority issued the world’s inaugural tokenized green bond, raising approximately $100 million.
The circular also states that trading platforms with licenses must establish SFC-approved compensation arrangements to safeguard against potential security token losses. To illustrate, operators of cryptocurrency trading platforms can show their adoption of protective measures like transfer restrictions or whitelisting to ensure the security of tokenized securities.
Related: JPEX scandal won’t hurt Hong Kong crypto vision: Financial Secretary
Conversations about tokenization have recently surged, and the SFC noted a heightened interest from financial institutions in tokenizing traditional financial instruments within global financial markets.
The regulatory body clarified that it has been reviewing different suggestions regarding tokenizing investment products, including those related to the primary offering and secondary trading of tokenized products on SFC-licensed virtual asset trading platforms. It added:
“The SFC sees the potential benefits of tokenization to the financial markets, particularly in increasing efficiency, enhancing transparency, reducing settlement time and lowering costs for traditional finance, but it is also aware of the new risks arising from using this technology.”
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Voting is under way in local elections across England, as well as in the Runcorn and Helsby by-election.
Due to Ofcom rules, Sky News is limited on what it can report until polls close at 10pm.
The votes mark the first electoral test for the party leaders since last year’s general election.
In total, 23 of England’s 317 local authorities are holding elections, alongside the Isles of Scilly.
The make up of around 1,270 parish councils are also due to be decided.
Read more:
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Where are they and how do I vote?
And six metro mayors are up for election.
The West of England, Cambridgeshire and Peterborough, Doncaster, and North Tyneside mayoralties already have a mayor in place – while Greater Lincolnshire and Hull and East Yorkshire are choosing a mayor for the first time.
Meanwhile, a by-election is being held in Runcorn and Helsby after previous Labour MP Mike Amesbury agreed to stand down following his conviction for punching a man in the street.
While this result is likely to come in overnight, most local election results won’t be known until Friday.
All voters in these elections must be over 18, and be registered.
Join Sky News presenter Jonathan Samuels and deputy political editor Sam Coates from midnight as the results start coming in. Lead politics presenter Sophy Ridge, political editor Beth Rigby, and data and economics editor Ed Conway will be taking over on Friday to report and explain what has happened.
North Carolina’s House of Representatives has passed a bill allowing the state’s treasurer to invest public funds in approved cryptocurrencies, which will now head to the Senate.
The House passed the Digital Assets Investment Act, or House Bill 92, on its third reading on April 30 by a vote of 71 to 44.
Republican House Speaker Destin Hall introduced the bill in February, which would allow the treasurer to allocate 5% of the state’s investments into designated digital assets.
The investments can only be made after obtaining an independent third-party assessment confirming that the crypto holdings are maintained with a secure custody solution and risk oversight and regulatory compliance standards are met.
New amendments allow the treasurer to examine the feasibility of allowing members of retirement and deferred compensation plans to elect to invest in digital assets held as exchange-traded products (ETPs).
The House also passed a related bill, the State Investment Modernization Act, or HB 506, with little discussion on April 30, in a 110 to 3 vote.
The bill aims to create the North Carolina Investment Authority (NCIA) to take over investment management from the treasurer.
If passed into law, authority to invest in digital assets would transfer from the treasurer to NICA, and it would require approval from its board of directors based on third-party assessments to make crypto investments.
Local news outlet NC Newsline reported that Treasurer Brad Briner supports both bills.
Arizona leads the crypto bill race
North Carolina is second to Arizona in the state-level race to approve legislation allowing local governments to invest in cryptocurrencies.
Related: New Hampshire Bitcoin reserve bill heads to full Senate vote
On April 28, Arizona’s House approved two bills, SB 1025 and SB 1373, proposing different methods for the state to establish a crypto reserve.
Arizona is the only state whose House and Senate have passed crypto-related bills, which are both awaiting Governor Katie Hobbs’ decision.
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Nearly 30 crypto advocate groups led by the lobby group the Crypto Council for Innovation (CCI) have asked the Securities and Exchange Commission for clear regulatory guidance on crypto staking and staking services.
The CCI’s Proof of Stake Alliance (POSA) group argued in an April 30 letter to the agency’s Crypto Task Force lead, SEC Commissioner Hester Peirce, that staking is fundamentally a technical process, not an investment activity.
“Staking isn’t niche — it’s the backbone of the decentralized internet,” the letter said.
The letter responded to the SEC’s call for public input on whether staking and liquid staking, where crypto users lock up their tokens to earn more, should be regulated under federal securities laws.
The coalition called for the SEC to support responsible inclusion of staking features in exchange-traded products (ETPs), and “avoid overly prescriptive rules that could freeze market structures and stifle innovation in the staking space.”
The group argued that staking fails to meet the securities-defining Howey test definition of an “investment contract” as stakers retain ownership of their assets.
They added that blockchain protocols, not a staking provider’s efforts, determine rewards, and providers don’t deliver profits through managerial decisions like a company does.
The letter requested that the SEC Issue principles-based guidance similar to recent SEC staff statements on proof-of-work mining.
“In the past 4 months, we’ve seen more movement and constructive dialogue with the SEC than in the past 4 years,” the group said. “Now, the industry is stepping up with concrete principles to include in guidance — a reflection of this new collaborative approach.”
Related: Ethereum ETF staking will have little impact without multimonth rally: Analyst
The group argued that the existing securities disclosure regime is ill-suited for staking services, which are fundamentally technical rather than financial in nature.
Big names in support of staking clarity
The Proof of Stake Alliance includes several high-profile crypto organizations and companies, including the venture capital firm Andreessen Horowitz (a16z), blockchain software firm Consensys, and the crypto exchange Kraken, which restored staking services in the US earlier this year.
The SEC has yet to approve a crypto staking exchange-traded fund (ETF) and delayed the decision on allowing staking for Grayscale’s spot Ether ETF on April 14.
In April, Bloomberg ETF analyst James Seyffart predicted that an Ether ETF that includes staking could come as soon as May.
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