Hong Kong exchange questions DAT transformation plans of multiple companies

The Hong Kong Stock Exchange has “blocked” the transformation plans proposed by at least five listed companies seeking to convert into digital asset treasury (DAT) entities, according to reports from Wen Wei Po News.

Sources cited by foreign media said the Hong Kong Stock Exchange has yet to approve any listing or transformation application related to DATs. The exchange reportedly questioned the intentions of several firms that planned to change their business models to that of holding or managing crypto reserves.

Hong Kong has no regulations governing DATs

Huang Tianyou, chairman of the China Securities Regulatory Commission (CSRC), told reporters that Hong Kong lacks legislation regulating listed companies’ participation in cryptocurrency investment or treasury arrangements. He explained that the regulator is monitoring market developments closely and will issue a directive if new guidance is needed to safeguard investors.

“The DAT model has gained popularity in the United States,” Huang said, referencing the trend of firms that allocate cash reserves to buy digital assets as treasury holdings. “There are many documents and analyses showing that when a company buys $1 billion in virtual currencies, its market value can rise by more than double. But that situation is also under review in the United States.”

The CSRC chairman also warned that most local investors have little understanding of what DATs actually are.

“As a regulatory agency, investor education is essential. After education, investors will realize that stock prices and valuations of companies transforming into DATs often carry significant premiums. If these activities become officially regulated one day, those premiums could disappear overnight,” he surmised.

He added that if any DAT company were to apply for a Hong Kong initial public offering, the firm would have to fully convince both the CSRC and the Stock Exchange during the approval process. “It should be impossible to list it in Hong Kong in the form of a DAT right now,” he said.

Regulatory grey zone on digital asset treasury limits

Huang further explained that the absence of clear rules makes it difficult to determine how far a listed company can go in purchasing digital assets with its cash reserves. “Are we not allowed to buy one Bitcoin? What about ten? What about a hundred?” he asked. “If all corporate cash were converted into Bitcoin, could that be justified simply because Bitcoin is a liquid asset?”

The regulator has confirmed Hong Kong’s “same share, different rights” (WVR) mechanism, introduced in 2018, is under review. The city’s Chief Executive announced in this year’s policy the intention to optimize the system to better accommodate high-quality innovation and technology companies.

Huang said the review would be comprehensive, with the primary objective of protecting small shareholders and distinguishing legitimate innovation firms from exploitation. “The first principle is to ensure that the interests of minority shareholders are not infringed,” he concluded.

Hong Kong crypto businesses worried about stablecoin law enforcement

The city’s regulatory caution over DAT structures comes against the backdrop of the Chinese special jurisdiction’s efforts to build a regulated digital asset ecosystem. In August, the government introduced new legislation to allow licensed entities to issue stablecoins, cryptos pegged to real-world currencies like the US dollar.

However, economists believe Hong Kong is “too cautious” about its stablecoin laws, which counters the expansion seen in the United States after the West imposed similar crypto-friendly regulatory efforts.

Recent reports suggest that Beijing’s increased involvement in digital asset oversight has cast uncertainty over Hong Kong’s crypto trajectory. The People’s Bank of China (PBOC) reportedly summoned several mainland firms under its jurisdiction, including banks and non-bank payment providers, instructing them to hold off on stablecoin initiatives until further notice.

The Financial Times reported that Ant Group and JD.com were among the firms told not to proceed with their stablecoin projects. According to individuals familiar with the matter cited by FT, some of these potential issuers were once enthusiastic about applying for Hong Kong’s first stablecoin licenses, but have now taken a wait-and-see stance.

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