Hong Kong's Securities and Futures Commission ("SFC") warned on Tuesday, 5 September, it may regulate some fundraisings that are done through digital currencies as volumes of the so-called initial coin offerings ("ICOs") surge around the world.
The move comes just a day after China banned and deemed illegal the practice of raising funds through launches of token-based digital currencies, causing a plunge in the price of popular ones, including Bitcoin and Ethereum.
Bitcoin slid 1.9 percent in mid-afternoon trade in Hong Kong, adding to the previous session's slump of 7.2 percent.
ICOs have become a bonanza for digital currency entrepreneurs globally, and have provided the fuel for a rapid ascent in the value of cryptocurrencies this year that has driven fears of a bubble that could burst.
The regulator said while some ICOs could be treated as a type of "virtual commodity" which is not regulated, others that offer equity or ownership interest or acknowledge a debt or liability may be considered a security and are subject to laws in the city.
The SFC added that firms offering ICOs deemed as securities would also have to be licensed or registered with the regulator.
Regulators around the world are rushing to tighten rules around ICOs to prevent potential fraud, money laundering and improve investor protection. Hong Kong's move follows similar warnings in the United States, Singapore and Canada.
In total, about US$2.32 billion has been raised through ICOs, of which US$2.16 billion was raised this year alone, according to cryptocurrency analysis website Cryptocompare.