HKSFC Says Unlicensed STO Trading is a Criminal Offence

Reading Time: 2 minutes

Security Token Offering (STO) trading is becoming popular as the ICO era appears to be coming to an end. More projects and companies are turning to STOs in the hope of securing the vital funding that they need to get off the ground to launch, but the Hong Kong Securities and Futures Commission HKSFC says that unlicensed STO trading is now a criminal offense. As STOs are often classified as securities, any platform that markets and distributes security tokens operating in Hong Kong would need to be licensed and registered for Type 1 regulated activity.

Denting Upcoming Plans

This new ruling by the HKSFC will put a serious dent in a number of project’s plans, especially those launching in Hong Kong or looking to attract investors from the region. If projects don’t apply for the correct licensing they could fall foul of the rules and face hefty fines. A similar process is happening in the US, whereby security tokens are required to register as securities or face the full wrath of the US Securities Exchange Commission (SEC). As time passes on, more projects will feel the pinch, as they are forced to delay launches while they wait for regulatory approval to begin their STO funding.

BitBond On the Rise

Over in Germany, BitBond finally got the green light from regulators to launch its STO to the world. It’s the first STO to be launched in the country, making it a groundbreaking case for the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) – Germany’s financial watchdog. BitBond being given the green light from the BaFin will allow it to promote its STO around Europe thanks to EU passporting rights of securities. The EU could quickly become popular for STOs as many jurisdictions look to become an STO haven. Malta is a standout jurisdiction for companies to list STOs, as it’s already seen as a popular destination for financial services firms looking for relatively lax regulation while having access to EU passporting rights.

As the HKSFC shuts the door on unlicensed STO trading, the STO space becomes more secure. While it will require increased effort from projects to finally get access to funding, it will help weed out the fake projects looking to scam investors out of their hard-earned money. Hopefully, more jurisdictions follow Hong Kong’s example and fully regulate the STO space as if it was an IPO.