The Hong Kong Securities and Futures Commission wants NFTs regulated

The Hong Kong regulator has issued a warning to investors about the dangers of investing in non-fungible tokens (NFTs).

The Hong Kong Securities and Futures Commission issued a statement on June 6, defining which NFTs are subject to its jurisdiction and cautioning investors to avoid regulated securities.

The statement warned of hazards such as "illiquid secondary markets," "volatility," "obscure pricing," "hacking," and "fraud," and advised investors not to engage in NFTs if they "cannot fully grasp them and endure the potential losses."

Assets that "push the boundaries between a collectible and a financial asset" — those organized like a security or a collective investment scheme — are of special concern to the Securities and Futures Commission (SFC) (CIS).

A CIS is a sort of investment agreement that allows people to combine their money to invest in a certain asset or property.

In addition, the Hong Kong Securities and Futures Ordinance (SFO) noted that A CIS is managed in escrow, and its participants do not have day-to-day control over its management but are entitled to profits, income, or other rewards.

The Royal Museum of Fine Arts Antwerp's fractionalization and security token selling of James Ensor's 1924 painting "Carnaval de Binche" on the Polygon blockchain is a recent example.

Any Hong Kong resident who wishes to issue NFTs or target local investors must get a license from the SFC or be subject to certain authorization requirements under the SFO, according to the financial regulator.

Hong Kong recently restricted the selling of crypto spot ETFs to only professional investors, defined as individuals with a portfolio worth more above 8 million Hong Kong dollars (about $1.2 million).

The Hong Kong Monetary Authority, however, has labeled "payments-related stablecoins" a threat to financial stability.