Hong Kong’s securities regulator has warned investors to be wary of risks that are associated with non-fungible tokens (NFTs). Investors should only consider NFTs if they are fully informed.
NFTs ‘Straddle the Line Between Collectibles and Financial Assets’
Hong Kong regulators have stated that NFTs can face risk associated with virtual assets. Investors shouldn’t invest in them if they aren’t aware of these risks.
Interface News reports that some of the risks are: a lack in liquidity on the secondary market; volatile prices; a lack in transparency regarding pricing NFTs and hacking.
The regulator’s warning comes after the HKSRC said it had observed that some NFTs have unique qualities. Explaining this, the report said: “some NFTs straddle the line between collectibles and financial assets, such as subdivision or homogeneity with structures similar to securities or, especially, interests under ‘collective investment schemes’ tokenized NFTs.”
The report went on to state that if an NFT is deemed to “constitute an interest under a collective investment scheme,” then any marketing or distribution of such may constitute a “regulated activity.” According to the regulator, any person carrying out any such regulated activity must be licensed.
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