TLDR
- The SFC is investigating whether shares of DAT firms are trading far above the value of their crypto assets.
- A study by 10X Research estimates $17 billion in losses for retail investors in these stocks.
- Hong Kong seeks to curb the “rebranding” of companies accumulating crypto without real operations.
Hong Kong’s Securities and Futures Commission (SFC) has placed listed companies that maintain digital asset treasuries (DATs) under scrutiny. The move follows indications that retail investors may have lost billions trading these stocks.
The regulator is concerned that the share prices of some of these companies are trading far above the real value of their cryptocurrency holdings, raising serious doubts about investor protection and market transparency.
Kelvin Wong Tin-yau, chairman of the SFC, noted that they are closely monitoring how these firms manage their crypto assets. Wong cited examples from the U.S. where valuations doubled compared to the cost of the portfolios.
This concern is aggravated by findings from 10X Research, which estimate collective losses of $17 billion for retail investors in DAT firms, often from buying shares at an excessive premium over the net asset value. Local companies like Boyaa Interactive and Ourgame International have already seen their stock performance weaken.
Global regulatory caution and measures in Hong Kong
The SFC’s review of digital asset treasuries is part of a broader effort to assess financial stability risks. Hong Kong authorities have already taken measures against companies attempting to “rebrand” themselves as crypto-holding entities without substantial business operations.
The SFC invoked listing rules that limit companies from holding excessive liquid assets, including cryptocurrencies, without a clear operational rationale. Wong announced that the commission will expand public education campaigns on the risks of DATs.
This regulatory caution is not limited to Hong Kong. In Australia, the ASX restricts listed firms from holding more than 50% of their assets in cash or cash equivalents, complicating crypto treasuries.
In India, the Bombay Stock Exchange recently rejected a listing proposal from Jetking Infotrain due to its plans to allocate funds toward digital assets. Once the SFC completes its review, it will determine if specific guidelines are required for DATs, as Hong Kong currently lacks a framework for listed companies investing directly in cryptocurceries.
