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The Floki Inu (FLOKI) ecosystem has issued a statement in response to the Hong Kong Securities and Futures Commission (SFC) warning about its staking program. SFC listed Floki and TokenFi Staking Program as suspicious investment products on January 26, 2024.
Floki expressed regret for what he described as excessive SFC enforcement and outlined the steps he had taken to comply with regulations in Hong Kong:
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Prominent notices have been placed on the Floki and TokenFi staking websites to warn Hong Kong users that they are not eligible to participate in the staking program.
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Practical measures have been implemented to prevent Hong Kong users from participating in the staking program.
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The community will continue to block Hong Kong users from participating in the staking program until the regulatory issues are resolved. As of today, there is no record of Hong Kong users participating in the staking program.
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The offline marketing campaign in Hong Kong has been paused ahead of its planned launch in mid-December 2023.
According to the statement, SFC's main concern appears to be the high Annual Percentage Yield (APY) of the Floki and TokenFi cryptocurrency staking programs. In his official response, Floki explained what he claimed were two main reasons for the high APY:
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Instead of raising funds from Venture Capitalists (VCs) or conducting a presale, which would have resulted in VCs and presale buyers owning the majority of the token supply, Floki chose not to raise funds from VCs or conduct a presale. Instead, the majority of TokenFi token supply was allocated to users who staked tokens.
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54% of the TokenFi supply was allocated to Floki stakers and 7% of the supply was allocated to TokenFi stakers. This ensures that rewards are concentrated in the hands of those who believe in the FLOKI ecosystem rather than VCs. This translates to $156,709,000 in rewards for those who stake FLOKI and TOKEN over a four-year period based on TokenFi's current market cap determined solely by market factors.
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Rewards are denominated in TOKENS, the tradable utility token of the TokenFi platform, so they are variable and subject to market conditions. Staking return may fluctuate depending on market prices of the TOKEN. In fact, staking APY decreased as more people staked.
However, the statement by the SFC, which is Hong Kong's SEC, was actually reported by Floki a few days before the statement. In his statement, Floki said that Hong Kong authorities would make a statement about the token, but he described this as a positive development.