The Hong Kong Securities Regulatory Commission (HKSRC), Hong Kong’s apex securities regulator, has warned residents about the potential risks associated with owning and interacting with Non-Fungible Tokens (NFTs).
Potential investors are advised to understand the risks involved before investing in NFTs.
According to reports, the Hong Kong regulator disclosed that some risks are associated with virtual assets such as NFTs, and investors must be aware of them before investing.
In the statement made by the Hong Kong Securities Regulatory Commission (HKSRC), the regulator mentioned some of the risks such as price volatility, market illiquidity, hacking concerns, as well as transparency issues in NFT value.
The Hong Kong securities regulator noted that NFTs were peculiar and possessed unique qualities. Their report stated that “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.”
Based on reports, the authorities wanted residents to understand what they were getting into by purchasing NFTs because they represented different things.
The regulator also added that guidelines had to be followed for those NFTs that were seen as constituting “an interest under a collective investment scheme.” As a result, advertising or distributing this type of NFT is regulated; and anyone participating must have the proper authorization.
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