The Hong Kong Securities and Futures Commission warns of the bubble risk of encryption reserve companies and plans to formulate regulations on the coin-holding behavior of listed companies.

The Hong Kong Securities and Futures Commission (SFC) has recently been following the trend of digital asset reserve companies (Digital Asset Treasury, DAT), pointing out that the stock prices of some companies have shown a high premium detached from fundamentals due to their large holdings of encryption assets. SFC Chairman Martin Huang stated that the regulatory body will study whether it is necessary to formulate guidelines for DAT and strengthen investor education to prevent market speculation and risk proliferation.

Hong Kong authorities follow: DAT cryptocurrency inflated valuation, regulatory gap raises concerns.

According to a report by the South China Morning Post, Huang Tianyou pointed out at a press conference this week that the Securities and Futures Commission is closely monitoring the operating models of encryption reserve companies and is concerned about the significant premium between their stock prices and the cost of holding encryption assets. He cited a case from the United States to illustrate this:

A company bought 1 billion dollars worth of encryption, which is often reflected in the company's stock price and market value, typically more than double, that is, over 2 billion dollars. In fact, the United States has also begun to examine the relevant situation.

He emphasized that retail investors often find it difficult to understand the actual risks and value structure behind encryption reserve companies. Regulatory agencies will strengthen education and warnings to prevent excessive speculation in the market.

The Hong Kong Stock Exchange's position is clear: the listing of DAT is almost impossible.

In recent years, several listed companies have expressed the intention to transform into DAT enterprises focused on encryption assets, but Huang Tianyou pointed out that the Hong Kong Stock Exchange has now raised questions and rejected at least five similar applications.

Even though the Hong Kong Stock Exchange and the Securities and Futures Commission have not yet established specific regulations regarding this, companies in Hong Kong are still prohibited from becoming listed entities that purely hoard encryption.

He also stated that if listed companies choose to purchase encryption with cash, regulatory agencies will continue to follow their risk exposure levels.

( encryption reserve company faces obstacles! The three major stock exchanges in the Asia-Pacific region strictly control listings, and MSCI recommends excluding DAT from the index )

Regulatory gray area: Can companies invest in encryption? How much can they invest?

Regarding whether enterprises can purchase encryption assets, Huang Tianyou described that the current “red line” is still not clear:

If you can buy just 1 bitcoin, what about buying 10 or 100? If all cash is invested in bitcoin, how should it be defined?

He pointed out that cryptocurrency assets are highly volatile and lack transparency, and when companies use them as their main assets, the gap between stock prices and intrinsic value will be further amplified.

He reminded investors that if regulatory policies are implemented in the future, these premiums may disappear within a day, urging market participants to carefully assess potential risks.

Investor education becomes key: SFC plans to promote market guidelines and risk awareness.

In response to the global craze for DAT, Huang Tianyou stated that the Securities and Futures Commission will “study whether it is necessary to formulate relevant regulatory guidelines,” while also promoting a public education program to help investors distinguish between DAT and the actual financial structure.

After education, investors should be able to understand how the premiums of these companies' stock prices are generated and realize that these premiums can evaporate in an instant.

(DAT Survival Skills Unveiled, the encryption meme stock is full of creativity, can it successfully revive the stock price? )

Hong Kong takes a cautious attitude: the dual-class share structure is under simultaneous review.

In addition to the DAT issue, Huang Tianyou also mentioned that Hong Kong's “same share different rights (WVR)” system, launched in 2018, will undergo a comprehensive review. In the future, while protecting the rights of minority shareholders, efforts will be made to attract more innovative and technology companies to go public, in order to strengthen Hong Kong's image as a regulated and robust international financial center.

As global publicly listed companies increasingly incorporate encryption assets into their balance sheets, the attitude of Hong Kong regulators appears cautious and clear. The SFC's statement this time shows that Hong Kong still adheres to the principle of stability over innovation, which also echoes China's recent tightening of encryption regulations.

( JD, Ant stablecoin project called off? Regulatory pressure from China affects Hong Kong's innovative pilot )

This article warns about the bubble risk of encryption reserve companies issued by the Hong Kong Securities and Futures Commission, proposing regulations on the coin-holding behavior of listed companies, first appearing in Chain News ABMedia.