The Hong Kong Securities and Futures Commission (SFC) has warned users about staking in the dog-themed memecoin project Floki, describing them as "suspicious investment products."
On Jan. 26, the SFC cautioned users from its jurisdiction about the Floki and TokenFi staking programs, pointing out their annualized return promise of between 30% and more than 100%. According to the SFC, investors should be cautious about products that claim to offer returns that are “too good to be true.”
Floki responded to the Hong Kong Securities and Futures Commission (SFC) warning by blocking Hong Kong-based users from joining its staking program.
The regulator also highlighted that neither of the investment products were authorized in Hong Kong. The SFC added that unauthorized investment schemes have limited to no protection under its Securities and Futures Ordinance (SFO) and that investors “may lose all their investments.”
We just published a response to the Hong Kong SFC's notice about the Floki and TokenFi staking programs.— FLOKI (@RealFlokiInu) January 29, 2024
Our response highlights our thoughts about their notice, why $FLOKI and $TOKEN can sustainably have an impressively high APY, and our plans going forward!… pic.twitter.com/YfpnnDMhfq
In a Jan 29 blog post, the people behind the memecoin announced that they’ve been working with its legal advisers to clarify and address potential regulatory issues for the staking project.
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The team said that they’ve taken several steps, including placing warnings on the Floki and TokenFi staking sites to warn users from Hong Kong that they are not eligible to join. They wrote:
“As a responsible community, we will continue to implement those measures to prevent Hong Kong users from joining the staking program until the relevant regulatory issues have been resolved.”
The team also confirmed that as of Jan. 29, there’s no record of Hong Kong users joining the staking programs. The Floki team added that they had already paused their offline marketing in Hong Kong before its launch in December 2023.
The Floki team addressed the SFC's primary concern about the high annual percentage yield (APY) by offering multiple explanations. They highlighted that the “rewards are volatile and influenced by market dynamics.” Further, they clarified that the value of staking rewards may fluctuate based on the market valuation of the token rewards.
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