Hong Kong Regulator Reminds Investors of Risks Associated With NFTs

Hong Kong Regulator Reminds Investors of Risks Associated With NFTs

Hong Kong’s securities regulator has warned traders to be cautious of dangers which are related to non-fungible tokens (NFTs). The regulator additionally suggested traders to think about investing in NFTs provided that they absolutely perceive the dangers.

NFTs ‘Straddle the Line Between Collectibles and Financial Assets’

A Hong Kong regulator has stated NFTs face dangers which are related to different digital property and traders shouldn’t spend money on these property if they don’t absolutely perceive such dangers.

According to a report by Interface News, the Hong Kong Securities Regulatory Commission (HKSRC) stated a few of these dangers embrace a scarcity of liquidity within the secondary market, risky costs, a scarcity of transparency within the pricing of NFTs, and the chance of hacking.

The regulator’s warning comes after the HKSRC stated it had noticed that some NFTs have distinctive qualities. Explaining this, the report stated: “some NFTs straddle the road between collectibles and monetary property, equivalent to subdivision or homogeneity with buildings much like securities or, particularly, pursuits beneath ‘collective funding schemes’ tokenized NFTs.”

The report went on to state that if an NFT is deemed to “represent an curiosity beneath a collective funding scheme,” then any advertising or distribution of such might represent a “regulated exercise.” According to the regulator, any individual finishing up any such regulated exercise have to be licensed.

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