What are the legal risks for distributors and participants

Editor, Wu said the block chain

THIS INTERVIEW, WHICH INVITED LAWYERS IN THE FIELD OF ENCRYPTION LAW, GIN GEM, FOCUSED ON THE TOPIC OF “GIVERIZATION STOCKS”, FOCUSED ON THE TRUE LEGAL STRUCTURE OF THE RELEVANT PRODUCTS IN THE CURRENT MARKET, THE NATURE OF THE DIFFERENCES WITH TRADITIONAL STOCKS, AND THE RESPECTIVE RISKS TO PLATFORMS, USERS AND KOL UNDER THE CHINESE LEGAL FRAMEWORK. LAWYERS ANALYSE SO-CALLED MONETIZED STOCKS IN MORE THAN ONE FORM, AND MAINSTREAM PRODUCTS TYPICALLY CONSIST OF A LASTING CONTRACT, A CONTRACT WITH A PRICE DIFFERENTIAL TO THE CFC AND A CHAIN OF ANCHORING REAL SHARES, BUT MOST OF THEM ARE NOT EQUIVALENT TO DIRECT HOLDING OF REAL STOCKS, ESPECIALLY WHERE THE CHAIN DOES NOT NORMALLY CONFER RIGHTS ON SHAREHOLDERS. UNDER STRONG REGULATORY FRAMEWORKS SUCH AS THE UNITED STATES, WHERE PRODUCTS HAVE ECONOMIC CHARACTERISTICS OF SECURITIES, THE ISSUE, SALE, EXTENSION AND TRADING SERVICES MAY FALL INTO THE LAW OF SECURITIES; WHILE IN CHINA, WHETHER THE BUSINESS IS UNDERSTOOD TO BE SECURITIES OR ENCRYPTED ASSETS, ORDINARY CHINESE USERS USUALLY DEAL MORE CLOSELY WITH “SELF-RISK” BEHAVIOUR, BUT IF KOL IS INVOLVED IN THE MARKETING OF SUCH PRODUCTS, THE LEGAL RISK IS SIGNIFICANTLY HIGHER THAN THAT OF ORDINARY INVESTORS AND MAY EVEN FIT INTO THE LOGIC OF SECURITIES PROMOTION, ILLEGAL DEALING OR RWA-RELATED REGULATION. FULL AUDIO CAN BE HEARD BY YT, THE LITTLE UNIVERSE。

The chain of “shares” is not equivalent to real stock: usually without real shareholder rights

Moderator: Hello, Counselor Kim. It seems that recently the currency rings of tokenized stocks are hot. A few days ago, Eugène launched a monetized stock of “Seven Bigs” and other currencies. So what are the legally different structures of so-called tokenized stocks in the market

GING: It's true that currencyization stocks have been very hot recently, as well as currency shares. What you're talking about is the use of tokenized stocks in chains and exchanges, which you can sell and trade in. There are many kinds of structures for the trade products that are currently on the market for this purpose. We can split into contracts and spot。

There are two main forms of contract. A model of traditional currency circles, represented by Hyperliquid and Minan, will continue. It operates on the same basis as an ordinary contract, with financial rates, leverage, bonds and a 7x24-hour trade. There is also a CFC model represented by Bybit. The full name of the CFCD is Contractor for Difference, the difference contract. The CFC is a very mature derivative of traditional finance, and it was able to provide stocks of CFDs, index CFDs, commodities CFDs, and foreign exchange CFDs prior to the introduction of such currency stock products。

This kind of US stock contract and stock contract above Bybit follows the traditional finance CFD game. So you'll see that it's commission, no money, but it'll have to wait and spend the night, and it's a 5x24-hour deal in the traditional CFFD model. Because it follows the traditional finance model, the main corporate provider of this service at the bottom of Bybit is to obtain a broker licence for offshore operations, such as that of Mauritius。

However, in either pattern, the bottom of these contractual products is not a real stock, but is essentially a derivative or a volatile stock price. It's just that Bybit did a little bit of compliance, and Hyperliquid and Français basically treated it as a currency ring contract。

On the spot line, however, most of the current mainstream exchanges still have access to services such as Ondo or xStocks. When these services are used, the primary responsibility for compliance is in fact with institutions such as Ondo and xStocks, where stocks are monetized. Their compliance logic and stabilization currency are somewhat similar: as many tokenized shares as a user buys, they are allocated as many real shares as possible, and third-party custodians are approached。

It's just that Ondo uses an offshore structure, and xStocks uses a European structure, so the compliance coverage is not the same. In the same vein, however, these stocks in the chain are usually not accompanied by shareholder rights. In big white, Ondo and xStocks at best owe the user a sum of money, not the real stock。

And there's a friendly reminder: if you want to buy some of the higher shares, try not to buy them on the chain. Because the two issue documents are rather vague about how dividends are treated。

This is now essentially industry-driven practice. I don't think it's 100 per cent compliance, but you can't say it's 100 per cent non-compliance. And now that the currency ring stock is actually trading more and more, I think that the true ultimate form of compliance in the future may have evolved from the models that we just talked about。

It's extremely risky to run a platform for tokenized stocks to China

Moderator: Is this tokenized stock closer to securities in Chinese legal terms, or is it closer to the type of encrypted currency that was disguised as forbidden

Gold: The spot part and the stock we usually understand will be closer, but it has no shareholder rights. As for the part of the contract, as you know, it's more like a contract deal。

In China’s legal context, whether it prefers securities or encrypted money, the platform is largely unwieldy in the legal sense of providing such services。

Because in China ' s financial regulatory environment and historical practices, financial innovation is more likely to be characterized only as a top-down push. Many bottom-up models often end up with official expressions such as “indicating risk”。

So if entrepreneurs want to do this business, my compliance advice is clear: don't touch the Chinese market。

What are the regulations for traditional tokenization

Moderator: A short while ago, Paul Atkins, President of the United States SEC, referred to four types of assets that were not recognized as securities and made it clear that only traditional securities that had been denominated would be subject to securities law. What are the specific constraints of securities law on traditional securities that are monetized

Gold: Let's look at the market's monetized stock products, all of which have one thing in common, that is, they're basically not open to the US market. The reason is also simple: the United States has the strictest regulation of securities globally, which is why particular attention will be paid to the classification and regulation of encrypted assets in the United States。

So we can go straight to the U.S. Securities Act and see what the strictest regulatory framework is. Particularly interested friends can also look at the relevant explanations given by the United States Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) on encrypted assets and transactions, as mentioned by Atkins on March 17。

Let me briefly sum up: whether a product is issued under or on the chain, it may be recognized as a security and subject to the United States Federal Securities Act as a whole, provided it has even a little economic character。

IN OTHER WORDS, THE PRODUCTS THAT WE HAVE JUST MENTIONED, WHETHER THEY ARE CONTRACTUAL MODELS, CFC MODELS, OR CLOSER TO SPOT MODELS, ARE SUBJECT TO THE FULL REGULATION OF SECURITIES LAW, AS LONG AS THEY ARE ESSENTIALLY SECURITIES PROPERTIES。

Specifically, there are several main levels:

The first is..Compulsory registrationI DON'T KNOW. THE WHOLE PROCESS OF ISSUING, SELLING, ETC. OF TOKENIZED SHARES IS, IN PRINCIPLE, SUBJECT TO REGISTRATION WITH THE SEC; THE RELEVANT EXEMPTION CLAUSE MAY ALSO BE APPLIED IF THE CONDITIONS ARE MET。

The second is..Anti-fraud requirementsI don't know. In other words, the issuer may not have any false statement or material omission during the issuance, promotion and survival of a monetized stock, or face the legal consequences of securities fraud。

The third is..Compliance requirements for service providersI don't know. That is to say, the provision of a platform for currencyization of stock transactions, or the related intermediary service, itself needs to be licensed. You're either going to get exchange plates or broker plates。

Is a contract on Hyperliquid meant compliance

Gene: There's a common misunderstanding here, and many may think that the standard is an official body or a regulatory body, but not really. It is essentially a listed company and is for profit; similarly, NASDAQ is a listed company for profit. At best, they are closer to ordinary listed companies and the USSRC, but never represent them as the SEC spokesperson。

If you look closely at the announcement of the logo, you'll find that it's for HyperliquidBranding Authorization and Bottom Data AuthorizationI don't know. In other words, the tag price for Hyperliquid can be used directly from the data officially provided by the standard. Moreover, SP500 is itself a trademark and commercial use without authorization would constitute a violation. Now announces that Hyperliquid has been granted the right of use of SP500. In other words, other exchanges that still use SP500 names without authorization may theoretically involve a violation of the trademark rights of the label。

As for these contractual products on the chain, the standard attitude is also very clear. It has a line under the bulletin to the effect that the SP500 contract product on Hyperliquid is not issued by the General and that the General has not been given any endorsement of the investment, and that investment decisions require the user ' s own DYOR。

So it's not essentially a “compliance signal”, but it does make one point: stock monetization is already a big trend. That is why an increasing number of institutions, listed companies are also beginning to be willing to try more。

After a monetization of shares, you have to pay taxes voluntarily

Moderator: Would it be illegal for Chinese users to trade such tokenized shares on their own

Gen. Kim: It's not a problem, it's closer to a legal act of risk. If you earn money by buying or selling tokenized shares and then you make your own tax declaration, it cannot be considered illegal in principle。

For, in legal terms, if an act is per se unlawful, it usually corresponds to legal consequences such as unlawful proceeds, and there is no logic that requires you to properly declare the proceeds for tax purposes while holding that your conduct is unlawful. This is the same thing as the tax authorities used to send text messages and tips to some of the United States-based shareholders to file taxes。

So Chinese users can certainly buy and sell. Better yet, if you are profitable, it is better to pay taxes on your own initiative。

How to defend a platform after default or break anchor

Moderator: Would the court take up the situation if the users were using these tokenized shares for trading, if the platform had defaulted, could not make the payment, or had broken anchor

Gene: If we push the legal logic to the extreme, whether it be in China, the United States, or anywhere else, so long as a thing is essentially a security, then it should be regulated by the securities law and the CVM system, and in theory it should be accepted。

BUT THE LOGIC IS PERFECT AND THE REALITY CRUEL. THE CURRENT SITUATION IS THAT IF YOU BUY A CONTRACT PRODUCT, WHICH RESULTS IN BROKEN ANCHORS, ABNORMAL MARKING PRICES, OR OTHER EXTREME SECURITY INCIDENTS, YOU CAN OFTEN RELY ON THE PLATFORM ITSELF. FOR EXAMPLE, IF YOU BUY A PERMANENT CONTRACT, IT'S PROBABLY A CHECK ON THE COIN, THEN YOU'LL HAVE TO FIND OUT IF IT DOESN'T MATTER. SO IF YOU BUY A CFC MODEL, THE OTHER SIDE MAY HAVE SOME KIND OF LICENSE PLATE, BUT THESE PLATES ARE USUALLY OFF-SHORE. FOR EXAMPLE, THE PLATFORM HAD BEEN LICENSED IN MAURITIUS, AND IT WAS IMPOSSIBLE FOR THE INVESTOR TO ACTUALLY GO TO THE MAURITIUS FINANCIAL SERVICES COMMISSION TO DEFEND HIS RIGHTS。

In the spot class, Ondo may be a little more assertive than these contracts or CFC, because it has a European entity and has a European license plate. European regulatory enforceability will certainly be slightly stronger than offshore areas. But if you're going to Europe as a Chinese user, it's very expensive。

And it's difficult, not necessarily winning. So you might say, like, if I went to some stock monetization agency with an American background, wouldn't it be better? Ondo, for example, does have an American background, but Ondo now offers a monetized stock service that is also directed outside the United States, so its legal framework is still tied to the offshore system. In this way, the end result is the same, and you're still going offshore to defend your rights。

These things are actually difficult. So, a sharper audience may already understand what we're saying:Such a global business model of natural services is per se difficult to defend。

But on the other hand, you can see that the volume of these transactions is still growing in the money ring. Why would people invest so much money and trade so much real money in such a difficult place to defend? I think it's not just the simple logic of "pure casino, willing to lose." This suggests that, over the years, the currency ring has also gradually built its own set of trust standards。

There are also companies, some teams and to some extent the role of the CVM, which allows the large financial system, which is otherwise out of regulation, to operate relatively normally。

KOL PARTICIPATION IN THE PROMOTION OF TOKENIZED SHARES MAY FALL WITHIN THE RESTRICTED RWA POLICY

MODERATOR: I FEEL THAT YOUR LAST PARAGRAPH IS VERY GOOD. IT IS TRUE THAT OVER THE YEARS WE HAVE FELT THAT THE ENTIRE CIRCLE AND INDUSTRY ARE MOVING IN THE DIRECTION OF MORE COMPLIANCE AND REGULATION. BUT WOULD IT BE ILLEGAL FOR KOL TO BE INVOLVED IN THE MARKETING OF TOKENIZED STOCKS WHEN IT IS NOT FULLY COMPLIANT AS SUCH

GOLD: IN FACT, DOMESTICALLY, TOKENIZED SHARES MAY FALL UNDER ANOTHER TYPE OF POLICY REGULATION, NAMELY RWA, IN ADDITION TO BEING CONSIDERED SECURITIES。

THIS YEAR, IN FEBRUARY 2026, RWA WAS IDENTIFIED BY SEVERAL MINISTRIES. AS LONG AS THE BOTTOM HAS A CERTAIN STAKE AND ANCHORS REAL-LIFE ASSETS, IT MAY BE CONSIDERED A REAL-WORLD ASSET MONETIZATION. IN PRINCIPLE, IT IS STRICTLY PROHIBITED FOR YOU TO OPERATE IN THE COUNTRY OR TO PROVIDE RELATED SERVICES TO DOMESTIC USERS. IF IT WERE TO BE CHARACTERIZED AS RWA, THE INTERNET ENTERPRISE IN THE COUNTRY WOULD BE EXPRESSLY PROHIBITED FROM PROVIDING ANY COMMERCIAL PRESENTATION, MARKETING PROMOTION, FEE-DIRECTION, ETC. TO RWA。

EVEN IF IT WERE NOT TO BE QUALIFIED ACCORDING TO RWA, BUT RATHER TO BE UNDERSTOOD IN TERMS OF SECURITIES, DOMESTIC PROMOTION OF SECURITIES WOULD ITSELF REQUIRE QUALIFICATION. YOU MUST HAVE A PROFESSIONAL QUALIFICATION IN SECURITIES INVESTMENT CONSULTANCY AND REGISTER WITH THE SECURITIES INDUSTRY ASSOCIATION. THIS IS NOT RANDOM; IT USUALLY REQUIRES PASSING AN EXAMINATION AND HAVING A PROFESSIONAL EXPERIENCE OF A CERTAIN NUMBER OF YEARS. THIS IS IN ITSELF A STRONG REGULATORY AREA。

THIS COULD BE DONE BY REFERENCE TO PREVIOUS DOMESTIC REGULATORY CASES OF LARGE V OF RECOMMENDED STOCKS AND FUNDS. MANY PREVIOUSLY VIBRATING, WEB-BASED REDS, OPENLY RECOMMENDING SHARES TO USERS, BUT WITHOUT RELEVANT QUALIFICATIONS, WERE EVENTUALLY SEVERELY PUNISHED. IT IS POSSIBLE NOT ONLY TO FACE CRIMINAL LIABILITY, BUT ALSO TO RECOVER THE PROCEEDS OF THE OFFENCE AND IMPOSE MULTIPLE FINES. THE OFFENCES COMMONLY INVOLVED INCLUDE ILLEGAL DEALING, SECURITIES MANIPULATION AND EVEN FRAUD。

SO, KOL, IF IT WERE TO PARTICIPATE IN THE PROMOTION OF TOKENIZED STOCKS, WOULD FACE A MUCH MORE SERIOUS CONSEQUENCES THAN THE PLATFORM ITSELF. THIS IS A PERFECT WAY TO APPLY THE LAW ENFORCEMENT LOGIC OF DOMESTIC SANCTIONS ON INTERNET-BASED RECOMMENDED STOCKS AND FUNDS, FOR WHICH THERE ARE ALREADY MANY VERY CONCRETE AND PAINFUL CASES。