Hong Kong Regulators Crack Down on Digital Asset Treasury Models
Hong Kong regulators have blocked at least five listed companies from switching to treasury models for digital assets as they weigh whether formal guardrails are needed to contain valuation bubbles and protect retail investors. This move comes amid concerns about inflated valuations and the potential risks posed to retail investors. 
Regulatory Concerns and Investigations
The Hong Kong Securities and Futures Commission (SFC) is investigating whether new guidelines are needed for listed companies that hold cryptocurrencies. According to local media reports, SFC Chairman Kelvin Wong Tin-yau stated that the agency is monitoring how listed companies manage their digital assets amid concerns about inflated share prices that may not reflect underlying crypto holdings.
The SFC is concerned about whether the share prices of digital asset treasury (DAT) companies are trading at a significant premium over the cost of their DAT holdings. Wong cited examples from the United States, where his agency observed the market valuations of some listed companies holding cryptocurrencies rising to more than double the cost of their digital assets. This has led to concerns that retail investors may be overpaying for crypto exposure by purchasing company shares at a significant premium to the company’s net asset value.
Potential Risks to Retail Investors
A report by Singapore-based 10X Research found that retail investors may have lost an estimated $17 billion trading in digital asset treasury companies. This is a significant concern, as many shareholders may not fully understand the underlying risks of DAT. Some major Hong Kong-based DATs, such as Boyaa Interactive and Ourgame International, have also struggled with their share prices recently, with crypto market volatility in recent months adding to the pressure.
As a result, Hong Kong regulators are taking a more cautious stance towards listed companies switching to digital asset treasury strategies. The SFC has already resisted several attempts to rebrand traditional companies as crypto holding vehicles without clear operational substance, citing listing rules that prevent companies from holding excessive liquid assets on their balance sheets.
Global Regulatory Challenges
Hong Kong is not the only market where crypto-focused listed companies are struggling to gain regulatory approval. Similar obstacles have been reported in India and Australia, where stock exchanges have expressed concerns about companies investing large portions of their balance sheets in digital assets. In Australia, ASX rules prohibit listed companies from holding more than 50% of their assets in cash or cash-like instruments, making it difficult for companies to adopt a pure crypto treasury model.
Crypto industry experts have also raised the alarm over the rapid rise of digital asset treasury firms, fearing that many of them operate without clear risk controls or sustainable business models, leaving retail investors at risk in the event of a market turnaround. The SFC plans to increase public awareness and investor education efforts to help retail traders better understand how digital asset treasuries work and what risks they may pose.
After conducting its review, the SFC will decide whether it is necessary to set guidelines on DATs, as there are currently no regulations in Hong Kong for listed companies investing in cryptocurrencies. For more information on this topic, visit https://crypto.news/hong-kong-warns-retail-investors-on-digital-asset-treasury-risks/
