On April 20, 2026, the SFC issued a circular outlining requirements for tokenisation of SFC-authorised investment products, covering background, primary/secondary dealing rules, disclosure, and prior consultation.
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On April 20, 2026, the Securities and Futures Commission ("SFC") issued a circular setting out requirements for the tokenisation of SFC-authorised investment products under Part IV of the Securities and Futures Ordinance for public offering in Hong Kong. Revised on 20 April 2026, the circular was last updated on 20 Apr 2026.
Regulatory Issuance and Scope
Tokenisation involves creating blockchain-based tokens representing ownership in investment products, recorded digitally for direct offering, intermediary distribution, or trading among participants. Market participants are exploring this to enhance efficiency, reduce operational costs by minimising intermediary reliance, and access end-investors through new channels.
SFC Approach to Trading and Development
Adopting a see-through approach, the SFC permits primary dealing (subscription and redemption) provided underlying products meet authorisation requirements and new risk safeguards. Secondary trading on SFC-licensed virtual asset trading platforms is allowed subject to fair pricing, orderly trading, liquidity, and disclosure measures. The SFC will continue engaging with the evolving Web3 ecosystem to explore advanced features delivering economic benefits.
Product Provider Obligations and Compliance
Product Providers must ensure underlying products meet all regulatory rules, including eligibility, structure, and disclosure, while adhering to the Tokenised Securities Circular. Providers retain ultimate responsibility for operational soundness and record keeping, even under outsourcing arrangements, and must not issue products in bearer form. Appropriate cybersecurity measures, including burning mechanisms to mitigate hacking risks, are required alongside business continuity plans. Public-permissionless blockchains are prohibited without additional controls, such as permissioned tokens. Upon request, Providers must demonstrate smart contract integrity, obtain third-party audits, and secure satisfactory legal opinions.
Offering Documents and Distribution Standards
Offering documents must clearly disclose the tokenisation arrangement, specifically whether on-chain or off-chain settlement is final, along with ownership representation and associated risks like cybersecurity or regulatory changes. Distributors, including Product Providers distributing their own products, must be SFC-licensed intermediaries complying with conduct rules and suitability assessments. Providers must confirm they have at least one competent staff member to supervise the tokenisation arrangement and manage technology-related risks.
Authorisation and Consultation Procedures
Prior consultation is mandatory for new tokenised products, existing product tokenisation, and material changes to arrangements, with prior approval required for specific changes such as adding new tokenised unit classes. Given the evolving nature of the sector, the SFC may impose additional guidance or requirements. For clarification, stakeholders should contact the relevant case team member of the Investment Products Division.
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