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

Local media reports citing Hong Kong’s Securities and Futures Commission chairman, Kelvin Wong Tin-yau, claim the agency is monitoring how listed firms manage digital asset treasuries, as they are concerned about inflated share prices that may not reflect underlying crypto holdings.

“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, as he highlighted examples from the United States where his agency observed that some listed companies holding crypto saw their market valuations soar to more than double the cost of their digital assets.

According to findings published by Singapore-based 10X Research earlier this month, retail investors may have lost an estimated $17 billion trading digital asset treasury companies, as many shareholders overpaid for crypto exposure by purchasing company shares at a significant premium to the company’s net asset value.

Some of the major Hong Kong-based DATs, such as Boyaa Interactive and Ourgame International, have also seen their share prices struggle in recent times, with the crypto market’s volatility over the past few months adding to the pressure.

As such, Hong Kong regulators are taking a more cautious stance toward listed firms shifting into digital asset treasury strategies, and have already moved against several attempts to rebrand traditional businesses into crypto-holding vehicles without clear operating substance, citing 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, adding that the SFC plans on strengthening public awareness and investor education efforts to help retail traders better grasp how digital asset treasuries operate and the risks they may carry.

After conducting its review, the SFC will decide whether “it is necessary to establish guidelines on DATs,” one report said, as Hong Kong currently has no regulations governing listed companies investing in cryptocurrencies.

Digital asset treasuries face hiccups in more jurisdictions

Hong Kong is not the only market where crypto-focused listed firms are struggling to gain regulatory approval. A Bloomberg report from earlier this month disclosed similar roadblocks in India and Australia, where stock exchanges have raised concerns about companies allocating large portions of their balance sheets to digital assets.

Notably, in Australia, ASX rules bar listed firms from holding more than 50% of their assets in cash or cash-like instruments, making 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 over plans to invest proceeds in crypto.

Crypto industry experts have also rung the alarm over the rapid rise of digital asset treasury firms, concerned that many of them operate without clear risk controls or sustainable business models, leaving retail investors exposed if the market turns.