Hong Kong’s Securities and Futures Commission (SFC) has issued a warning regarding the risks posed by Digital Asset Treasury (DAT) companies, highlighting potential market vulnerabilities. The SFC noted that stock premiums for DAT firms may be significantly inflated compared to the underlying value of their digital assets, echoing similar concerns previously observed in the U.S.
Regulatory Oversight Intensifies
Kelvin Wong Tin-yau, Chairman of the SFC, emphasized that the commission is closely monitoring companies creating or planning to establish DATs—structures holding cryptocurrencies as their main assets—and is considering whether new market guidelines are needed.
“The commission is concerned that DAT company shares may trade at substantial premiums over their digital asset holdings. Such patterns have already emerged in the U.S., posing excessive risks for investors,” Wong said.
He further highlighted that many retail investors in Hong Kong may not fully understand the nature and risks of DAT companies, prompting the SFC to strengthen educational initiatives:
“We urge investors to recognize the full spectrum of risks associated with DATs. Should these structures ever become formally regulated, their market premiums could vanish almost overnight.”
Listing Challenges
The Hong Kong Stock Exchange has rejected proposals from at least five companies attempting to convert into DATs, with none receiving listing approval. Currently, public companies in Hong Kong are prohibited from transforming into digital asset treasuries, despite growing interest in such models following U.S. market developments.
Wong acknowledged the legal uncertainty surrounding public companies’ participation in crypto investments, noting that listing in a DAT format is effectively impossible under existing regulations.
Market Developments and Strategic Moves
Amid this regulatory scrutiny, some local firms continue to accumulate cryptocurrencies. DDC Enterprise Limited plans to acquire 10,000 BTC by the end of 2025, while Ming Shing Group Holdings Limited has partnered with Winning Mission Group Limited to secure funds for 4,250 BTC purchases.
The SFC is also reviewing potential reforms to Hong Kong’s listing framework, aimed at attracting innovative companies while maintaining investor protections. Proposals under consideration include lowering the listing threshold for tech firms and assessing mechanisms such as Weighted Voting Rights (WVR) to prevent disproportionate shareholder influence.
Wong stressed the need for clear definitions of “innovative companies” to prevent non-fintech firms from exploiting simplified listing regimes and emphasized the importance of fair corporate governance in protecting retail investors.
