Hashkey IPO launches on Hong Kong Stock Exchange next week! Researchers warn of two major risks: severely beautified financial reports and lack of asset transparency

Hong Kong’s compliant exchange Hashkey is about to be listed on the Hong Kong Stock Exchange with a valuation of HKD 19 billion, but a closer look at the prospectus reveals many issues. For example, no matter how badly HSK performs in the market, the company’s balance sheet remains unaffected, thus concealing the risks of token price volatility.

Researchers also warn that Hashkey’s reported total digital asset holdings do not detail the breakdown between Bitcoin, Ethereum, and its own HSK tokens. The public cannot discern how much of its assets are highly liquid mainstream coins versus how much are company-issued, less liquid HSK tokens. As an additional note: this risk is very similar to the FTX/FTT situation back in the day.

Moreover, Hashkey employs the unexercised rights ((Breakage)) concept to recognize revenue in advance and beautify its financials. This is like selling Starbucks gift cards: if you assume 95% of people won’t use them, you can compliantly convert 95% of that liability into revenue, even if very few people actually redeem them.

(Hong Kong Compliant Exchange HashKey Officially Lists on 12/17, Valuation HKD 19 Billion)

The first exchange to issue a token and go public, Hashkey’s on-chain revenue is just one dollar

As the world’s first exchange to both issue a platform token and get listed on a stock market, much attention is on how the HSK token will function after the IPO. On page 53 of the document, Hashkey defines HSK as the platform token used to pay gas fees on Hashkey Chain. But as we previously mentioned, HashKey Chain is a “dead public chain”: its 24-hour on-chain revenue is only $1, and TVL is just $1.21 million, meaning there’s virtually no on-chain activity.

(Hong Kong Compliant Exchange HashKey Set for IPO! Data Shows Years of Losses, Platform Token Plunges 90%)

On page 425 of the document, Hashkey mentions, “Although we have committed in the HSK whitepaper to use 20% of net profit to repurchase and burn HSK from the market, we have not met the repurchase conditions and therefore did not conduct any repurchases during the period.”

In plain terms, if Hashkey—after years of losses—finally turns a profit, 80% of the value goes to shareholders, and 20% to HSK tokens. With a valuation of HKD 19 billion (about $2.44 billion USD), 20% would imply an HSK market cap of roughly $490 million. Compared to the current $100 million circulating market cap and $400 million FDV, this seems underestimated.

No matter how badly HSK falls, it won’t be reflected on Hashkey’s balance sheet

Researcher Lacie analyzed Hashkey’s treatment of HSK from an accounting standards perspective. As is well known, issuing a token is equivalent to issuing debt. HashKey treats tokens as service vouchers; when HSK tokens are distributed to users or KOLs, it’s not considered a cash giveaway in accounting, but a future service obligation ((e.g., using tokens to offset future fees)). Thus, at the time of issuance, this is recorded as a contract liability on the balance sheet, representing a performance obligation for the company.

The value of HSK recorded under liabilities is locked and does not fluctuate with the token’s price on secondary markets (exchanges). Therefore, regardless of how badly HSK crashes in the market, the company’s balance sheet is unaffected, concealing the risks of token price volatility.

Researcher exposes how Hashkey uses accounting rules to beautify its financials

He further explains that Hashkey uses anticipated non-redemption rates to recognize revenue early, beautifying its financials. This is the biggest doubt raised in the article. Generally, liabilities can only be converted to revenue (recognized as income) when users actually “use” the token (e.g., to offset fees). But the article points out that the actual usage rate is extremely low (less than 2%). To make revenue look better, HashKey uses the following accounting technique:

Using the rule: According to IFRS 15 accounting standards, under the “Breakage” concept, if a company expects customers will not exercise their rights (i.e., use the tokens), it can proportionally recognize that part of the liability directly as revenue.

How it works: HashKey sets a very low “expected usage rate” (the article mentions only 5%). In other words, the company assumes that 95% of issued tokens will never be used.

Result: Based on this assumption, the company can directly convert about 95% of the issued tokens’ value from “liability” to “revenue.” This lets the company greatly increase reported revenue without actual business growth (i.e., even if users hardly use the tokens).

As an analogy: selling $100 worth of Starbucks gift cards, but based on historical data, expecting only $5 to be redeemed (expected usage rate 5%), and the remaining $95 lost or forgotten (expected non-usage rate 95%).

Accounting-wise, when customers spend that $5, you recognize $5 as income. But what about the $95? You can’t keep it as a liability forever. IFRS 15 stipulates: when you recognize the $5 of “usage revenue,” you must proportionally recognize the expected unused $95 as revenue as well.

In fact, the entire $100 will eventually become revenue. It’s just that the $95 is released into the income statement under the “Breakage” concept, following the same pattern as the 5% that is actually used. By setting a high non-usage rate, a large amount of liability can be recognized early as revenue, and this is valid in accounting logic. If you assume 95% of people won’t use it, you can compliantly “wash” 95% of the liability into revenue even if very few people actually use it.

He raises a question: under these circumstances, if you were Hashkey, would you pump HSK?

He also questions that the total digital assets listed in the prospectus do not disclose the ratio between Bitcoin (BTC), Ethereum (ETH), and its own token (HSK). The public cannot know how much of its assets are highly liquid mainstream coins and how much are company-issued, less liquid HSK.

As an additional note: if you remember, one of Alameda Research’s major issues at FTX was an over-concentration of assets in FTT.

(Alameda balance sheet leak: holds 60% of total circulating FTT, raising concerns about insolvency in the event of major volatility)

Massive mismatch between global compliant exchange trading volume and company valuations

On page 161 of the document, Hashkey summarizes the global compliant exchange market landscape, listing:

Company A: Upbit

Company B: Coinbase

Company C: Bithumb

Company D: Kraken

Company E: Bitvavo

Source: Hashkey Translation: Gemini 3

Interesting facts can be found in this table: the world’s largest compliant exchange by trading volume is actually Korea’s Upbit, not America’s Coinbase. Upbit’s company filings show a combined valuation of $13.6 billion. Already public Coinbase has a $75.4 billion market cap. Coinbase’s trading volume is only 92% of Upbit’s, yet its valuation is 5.5 times higher.

(Innovation really can change fortunes! Song Chi-hyung, Kim Hyung-nyeon become billionaires through Upbit)

Company D, Kraken, is currently seeking an IPO, with a latest valuation of $20 billion. Kraken’s trading volume is only a quarter of Upbit’s, yet its valuation is 1.47 times higher than Upbit’s. Finally, the star of this IPO, Hashkey, is valued at HKD 19 billion, about $2.44 billion USD. Hashkey’s trading volume is only 3.2% of Upbit’s, yet its market cap is about 17% of Upbit’s.

(Kraken valuation surges to $20 billion: Citadel contributes $200 million, 2026 IPO process accelerates)

It’s worth pondering whether this severe mismatch between market cap and market share reflects different countries’ regulatory barriers and costs, or hints at the growth ceiling for these exchanges in their respective service regions.

This article “Hashkey IPOs in Hong Kong Next Week! Researcher Warns of Two Major Risks: Severe Financial Beautification and Asset Opacity” first appeared on Chain News ABMedia.