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by Graham Lim and David Law, Jones Day

The Situation: Surging interest in digital tokens has caught the attention of regulators in Hong Kong.

The Development: Hong Kong's Securities and Futures Commission recently introduced additional regulatory measures, and seven cryptocurrency exchanges are under investigation for potential unlicensed trading in "securities."

Looking Ahead: Would-be buyers of digital tokens should review a number of considerations, some of which are enumerated here, before completing a purchase.

With the surging popularity of digital tokens, investments today are no longer limited to shares, bonds, and fixed deposits.

In its purest form, a digital "utility" token is a piece of computer code used to represent a particular asset or utility; it allows a person to access certain goods and services from its issuer in the virtual world. In some ways, it is not unlike a coupon issued by a department store in the physical world; that coupon allows a customer to obtain certain goods and services (e.g., a price discount) from that department store. However, the same technologies can be used to create digital currencies, where encryption and blockchain techniques can be used to generate units of currency and verify the transfer of value between participants using the same currency, operating independently of a central bank. Bitcoin is probably the best-known example of a cryptocurrency, but it is by no means the only one.

Increasingly, b......................

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