Hong Kong financial regulator, the Securities and Futures Commission (SFC), has announced that tokens issued via initial coin offerings, or ICOs, may be classified as securities.

In the statement, Julia Leung, the regulator’s executive director of intermediaries, explained that the SFC is “concerned about an increase in the use of ICOs to raise funds in Hong Kong and elsewhere.”

She warned that those involved in an ICO “need to be aware that some ICO structures may be subject to Hong Kong securities laws.”

Further, the classification may extend beyond ICOs into digital asset exchanges dealing in the tokens, according to the SFC, which states:

“Parties engaging in the secondary trading of such tokens (e.g. on cryptocurrency exchanges) may also be subject to the SFC’s licensing and conduct requirements.”

The statement just a day after an official announcement from financial authorities in China classified ICOs as illegal and demanded the refund of related investments to customers.

Regulators elsewhere have also recently started to warn on the status of ICOs as securities.

Last month, the U.S. Securities and Exchange Commission stated that the offering and sale of digital tokens may be “subject to the requirements of the federal securities law.” Canada regulators have also followed suite, saying that in “many cases … the coins/tokens should properly be considered securities.”

Hong Kong stock exchange image by Shutterstock