Learn Concept: Regulatory Measures on Tokenized Financial Products

By: Eliza Bennet

The Hong Kong Monetary Authority (HKMA) has introduced comprehensive regulatory restrictions that apply to the sale and delivery of tokenized financial products by authorized institutions. The new regulatory framework covers a wide variety of tokenized products that share similar terms, features, and risks as traditional financial instruments.

As per the regulations, institutions are required to perform thorough due diligence before offering tokenized products to customers. The institutions must disclose key terms, features, and the associated risks of tokenized products, including those linked with the underlying Distributed Ledger Technology (DLT) networks, potential safety threats like hacking, and legal uncertainties.

In addition, the HKMA has demanded that authorized institutions establish suitable policies, procedures, systems, and controls to identify and mitigate risks associated with selling and distributing tokenized products. Those providing custody services for tokenized products must conform to HKMA's standards for digital asset custody.

The comprehensive regulatory framework will not only foster innovation but also ensure strong consumer protection within the burgeoning tokenized product sector [source].