Hong Kong’s SFC blocks 5 Digital Asset Treasury listings – Report

Key Takeaways

Why is Hong Kong hesitant about DATs?

The regulator warned that retailers could not totally perceive the dangers related to DAT valuations.

What’s subsequent for the DAT phase?

It stays to be seen if the area will have the ability to deal with the present leverage danger as mNAVs commerce at a reduction.

Hong Kong’s securities regulator is conserving a detailed eye on developments in digital asset treasuries (DATs) after stopping 5 firms from switching to crypto.

In response to an area media reportthe watchdog was involved that some DATs pose underlying dangers that retailers is probably not totally conscious of.

Hong Kong Securities and Futures Fee (SFC) Chairman Kevin Wong Tin-yau added:

“The SFC is anxious about whether or not the share costs of DAT firms are buying and selling at a considerable premium to the price of their DAT holdings.”

He cited US circumstances the place premiums grew to become too excessive and created valuation dangers for traders. Wong stated the SFC will step up schooling and consciousness applications.

Diverging regulatory views on DATs

DATs embody crypto property equivalent to Bitcoin [BTC], Ethereum [ETH], Solana [SOL] and others as a part of their enterprise technique.

Pioneered by Michael Saylor’s Technique (previously MicroStrategy), a number of firms have jumped on the DAT mannequin to take a position within the crypto market.

Some crypto treasuries like Technique are actually sitting on billions of {dollars} in earnings. However the DATs’ inventory worth additionally inherits crypto volatility and different dangers, in accordance with regulators.

Final week, Bloomberg reported that the Hong Kong Trade (HKEX) blocked 5 firms that attempted to modify to DATs.

Comparable resistance has been reported in Australia. Corporations are prohibited from investing greater than half of their steadiness sheet in DATs, making the pivot basically “not possible.”

However some areas, such because the US (Technique) and Japan (Metaplanet), have a few of the high gamers in DAT.

But Nasdaq has change into stricter with the DAT itemizing. calling for better disclosure and shareholder involvement to mitigate dangers.

Declining mNAV ratios threaten DAT stability

Actually, a lot of the DAT’s mNAVs (market-to-net asset worth), which monitor relative inventory worth to crypto holdings, have collapsed into a reduction.

Supply: Blokwerken

The development may sluggish their crypto bids and power sell-offs within the underlying digital property if mNAV stays beneath 1 for too lengthy. If this low cost continues, firms could should promote digital property to scale back debt burden.

Some gamers prefer it Metaplanet And ETHZilla have began rising their mNAV by share buybacks, funded by promoting crypto holdings or utilizing them as collateral for a credit score facility.