Hong Kong’s Securities and Futures Commission (SFC) is expressing growing concern over the trend of companies integrating cryptocurrencies into their treasury management strategies. This phenomenon, referred to as Digital Asset Treasuries (DAT), allows public firms to acquire and hold cryptocurrencies like Bitcoin to provide shareholders with exposure to digital asset price fluctuations.
According to reports, the SFC is closely monitoring how these entities utilize crypto in their balance sheets. Kelvin Wong Tin-yau, the SFC chairman, emphasized that the regulator is particularly wary of the discrepancies between the share prices of these companies and the actual value of their cryptocurrency holdings. He stated, “The SFC is concerned about whether DAT companies’ share prices are traded at a substantial premium above the cost of their DAT holdings.”
This cautionary stance follows recent developments where the Hong Kong Stock Exchange and Clearing (HKEX) halted at least five companies from pivoting their strategies to include crypto hoarding. The HKEX, which serves as the city’s primary stock exchange, raised compliance issues regarding regulations that limit significant liquid asset holdings.
Underlining its vigilance, Wong indicated that the SFC intends to bolster public awareness surrounding the risks linked to Digital Asset Treasuries. “We caution investors to fully understand the underlying risks of DAT,” he remarked, signaling the regulator’s commitment to safeguarding market integrity.
The DAT concept gained traction with firms like Michael Saylor’s Strategy (formerly MicroStrategy), which adopted a Bitcoin treasury as a central aspect of its business model back in 2020. To date, Strategy has amassed a staggering 640,808 BTC, valued at approximately $70.6 billion. Despite spending around $47.4 billion to build its crypto treasury, the firm enjoys a remarkable profit margin of nearly 49% based on current market prices.
Such success stories have sparked enthusiasm amongst corporations, further fueling the DAT trend. Beyond Bitcoin, companies are also exploring treasuries invested in Ethereum and Solana. For instance, Bitmine boasts the largest ETH treasury globally, consisting of roughly 3.34 million tokens, valued at an impressive $13 billion. Furthermore, Forward Industries leads the pack in SOL holdings, managing 6,822 coins worth approximately $1.3 billion.
While DATs offer one avenue for indirect exposure to digital assets, traditional investment vehicles like spot exchange-traded funds (ETFs) also remain a significant option for traders. However, recent data from on-chain analytics firm CryptoQuant suggests waning demand for spot ETFs, highlighting a negative netflow of 281 BTC from US Bitcoin funds—the lowest metric recorded since April.
As these developments unfold, Bitcoin’s current trading value stands at around $110,000, having experienced a slight decline of 2.7% over the last 24 hours. Market participants continue to navigate the turbulent waters of cryptocurrency investments as regulatory oversight intensifies.
