Hong Kong Securities and Futures Commission Says Binance Security Token Offerings are Unregulated Activity

The Hong Kong Securities and Futures Commission (SFC) has issued a notice that Binance may be offering stock token offerings to Hong Kong investors. The SFC stated that Binance is not licensed to offer regulated activity in Hong Kong.

Binance has recently been the target of regulatory scrutiny in multiple jurisdictions as global regulators seek to reign in virtual asset service providers that may operate in violation of local law.

The notice states:

Stock Tokens are virtual assets that are represented to be backed by different depository portfolios of underlying overseas listed stocks, with their prices closely tracking the performance of the respective stocks.  As Stock Tokens can be denominated in fractional units, they are being promoted as an alternative means for investors to purchase fractional shares instead of the entire fully paid-up shares.

In Hong Kong, Stock Tokens are likely to be “securities” under the Securities and Futures Ordinance (SFO) and if so, they are subject to the regulatory remit of the SFC.

The SFC warns that where the Stock Tokens are “securities”, marketing and/or distributing such tokens – whether in Hong Kong or targeting Hong Kong investors – constitute a “regulated activity” and require a licence from the SFC unless an applicable exemption applies.

The SFC said that any person who provides an unregulated activity in stock tokens “may be prosecuted and, if convicted, subject to criminal sanctions.”

“The SFC does not tolerate any violations of the securities laws and will not hesitate to take enforcement action against unlicensed platform operators where appropriate,” said Thomas Atkinson, the SFC’s Executive Director of Enforcement.  “Investors should be wary of the risks of trading virtual assets on an unregulated platform.  If the platform ceases operation, collapses, or is hacked, investors may face the possible risk of losing their entire investments held on the platform.”

The SFC said they have received complaints from investors with “difficulties in withdrawing fiat currencies or virtual assets from their accounts opened with unregulated platforms.”

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