The FinTech Association of Hong Kong (FTAHK) said it has published a paper outlining best practices for running token sales in Hong Kong, in response to growing interest in digital token sales, often referred to as Initial Coin Offerings (ICOs).
Token sales have raised over US$3 billion this past year and have generated significant interest globally. In Hong Kong, the Securities and Futures Commission issued a statement on ICOs on 5 September 2017 explaining when digital tokens may be subject to the securities laws of Hong Kong. Other regulators have provided guidance to clarify the treatment of bitcoin and other “virtual commodities”, as well as considerations for banks around anti-money laundering and countering terrorist financing.
The paper, “Best Practices for Token Sales,” has been written to provide general and practical guidance on the latest best practices for those thinking about conducting a token sale as well as for those wanting to learn more about this area, said FTAHK, adding that the published work also aims to act as a voluntary best practices guide that could help entrepreneurs looking at doing a token sale.
The published work includes sections on understanding whether a token sale is the best fit for a particular project, the legal and regulatory issues to be aware of, tax and accounting considerations, cybersecurity controls, the need for adequate governance and control frameworks, the specific laws underpinning the need for appropriate know-your-customer (KYC) processes, and a specific sample KYC procedure that can help serve as a starting point, FTAHK noted
“The FinTech community in Hong Kong is keen to ensure that those who decide to conduct a token sale do so by implementing the latest global best practices in this space. Whilst there are no detailed regulatory guidelines around token sales, we believe it is important for the community to set some voluntary best practices that entrepreneurs can follow," said Karen Contet Farzam, Board Member, FinTech Association of Hong Kong.
“Digital assets have an important role to play in blockchain-based solutions and the digital economy. The speed of their evolution has made it difficult for regulation to keep pace at every turn, but there have been brutal misconceptions about tokens operating in a vacuum, or (conversely) being inherent scam and money laundering vehicles," said Urszula McCormack, Co-Chair of the Policy & Advocacy Committee. "It’s true that a token sale is not right for everyone. However, most “good" projects want to know how to run a strong, safe, fair and legal sale, with a long-term roadmap for success. This paper helps them achieve that.”