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Hong Kong Regulator Reminds Investors of Risks Associated With NFTs

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The Hong Kong Securities Regulator has warned investors about the risks associated with non-fungible tokens (NFTs). The regulator also advised investors to only consider investing in NFTs if they fully understand the risks.

NFTs “cross the line between collectibles and financial assets”

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The Hong Kong regulator said that NFTs face risks associated with other virtual assets and investors should not invest in these assets unless they fully understand such risks.

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According to report According to Interface News, the Hong Kong Securities Regulatory Commission (HKSRC) said some of these risks include lack of liquidity in the secondary market, volatile prices, lack of transparency in NFT pricing, and the risk of hacking.

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The regulator’s warning came after the HKSRC said it noticed some NFTs had unique qualities. Explaining this, the report states: “Some NFTs are on the verge between collectibles and financial assets, such as subdivision or homogeneity with structures similar to securities, or, especially, interests in tokenized NFT “collective investment schemes.”

The report goes on to say that if NFTs are deemed to be “of interest under a collective investment scheme”, then any marketing or distribution of them may constitute a “regulated activity”. According to the regulator, any person carrying out such a regulated activity must be licensed.

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Credit : news.bitcoin.com

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