Hong Kong warns retail investors on digital asset treasury risks

Hong Kong regulators have blocked at least five public companies from pivoting to digital asset treasury (DAT) models, as they consider whether formal guardrails are needed to curb valuation bubbles and protect retail investors.

According to local media reports citing Kelvin Wong Tin-yau, chairman of Hong Kong’s Securities and Futures Commission (SFC), the agency is closely monitoring how listed firms manage digital asset treasuries. The SFC is concerned about inflated share prices that may not accurately reflect the underlying crypto holdings of these companies.

“The SFC is concerned about whether DAT companies’ share prices are traded at a substantial premium above the cost of their DAT holdings,” Wong said. He highlighted examples from the United States, where some listed companies holding crypto have seen their market valuations soar to more than double the cost of their digital assets.

A recent report from Singapore-based 10X Research estimates that retail investors may have lost around $17 billion trading digital asset treasury companies. Many shareholders appear to have overpaid for crypto exposure by purchasing shares at significant premiums compared to the company’s net asset value.

Several major Hong Kong-based DAT firms, including Boyaa Interactive and Ourgame International, have experienced struggles with their share prices amid the crypto market’s volatility in recent months. This has added pressure on these companies and increased regulatory scrutiny.

As a result, Hong Kong regulators are adopting a cautious approach toward listed firms shifting into digital asset treasury strategies. They have already taken action against several attempts by traditional businesses to rebrand as crypto-holding vehicles without clear operational substance. This move aligns with existing listing rules that restrict companies from holding excessive liquid assets on their balance sheets.

“We caution investors to fully understand the underlying risks of DAT,” Wong continued, emphasizing that the SFC plans to strengthen public awareness and investor education efforts. These initiatives aim to help retail traders better grasp how digital asset treasuries operate and the potential risks involved.

Following its ongoing review, the SFC will decide whether it is necessary to establish formal guidelines on DATs. Currently, Hong Kong does not have specific regulations governing listed companies investing in cryptocurrencies.

Hong Kong is not alone in facing regulatory challenges with crypto-focused listed firms. A recent Bloomberg report highlighted similar roadblocks in India and Australia, where stock exchanges have raised concerns over companies holding large portions of their balance sheets in digital assets.

In Australia, for example, ASX rules bar listed firms from holding more than 50% of their assets in cash or cash-like instruments. This regulation makes it difficult for companies to adopt a pure crypto treasury model. Meanwhile, India’s Bombay Stock Exchange recently rejected a listing application from Jetking Infotrain, citing the company’s plans to invest proceeds in cryptocurrencies.

Crypto industry experts have also sounded alarms about the rapid growth of digital asset treasury firms. Many of these companies operate without clear risk controls or sustainable business models, potentially leaving retail investors vulnerable if the market takes a downturn.

As regulatory scrutiny increases worldwide, the future of digital asset treasury companies remains uncertain, with investor protection and market stability at the forefront of concerns.
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