Hong Kong fights against risks: investors warned about digital asset traps!

Hong Kong fights against risks: investors warned about digital asset traps!

Hong Kong regulators have taken steps to restrict the adoption of digital asset treasury (DAT) models by public companies. So far, at least five companies on the stock market have been blocked from adopting such models, reflecting regulators' concerns about potentially overvalued stocks and the need for new guidelines to protect retail investors. The Securities and Futures Commission (SFC) is currently monitoring how listed firms manage their digital asset treasuries.

SFC Chairman Kelvin Wong Tin-yau has expressed clear concerns about the share prices of DAT companies trading significantly above their actual digital assets. Examples from the US show that some companies with crypto holdings have market values ​​that more than double the cost of their digital assets. These unrealistic valuations could prove detrimental to investors.

Individual investor losses and regulatory concerns

A report from 10X Research estimates that individual investors have lost about $17 billion trading DAT companies, largely due to inflated stock prices. In particular, companies like Boyaa Interactive and Ourgame International have experienced difficulties with their stock prices during the crypto market's market volatility.

Regulators are concerned that companies are simply rebranding themselves as crypto holding companies without having substantial operational businesses. This conflicts with the listing rules, which prohibit excessive liquid assets. Wong also emphasizes the importance of educating investors about the risks of DATs.

Review of existing guidelines and international developments

The SFC is currently considering whether it is necessary to develop specific guidelines for DATs, as there is currently no regulation in Hong Kong for listed companies investing in cryptocurrencies. Similar regulatory challenges are also reported in India and Australia. In Australia, ASX rules restrict listed companies to a maximum of 50% of their assets in cash or cash-like instruments.

In India, an application to list Jetking Infotrain on the Bombay Stock Exchange was rejected as the company planned to invest in cryptocurrencies. Experts also warn that many digital asset treasury companies do not have clear risk controls or sustainable business models, further increasing the risks for retail investors.