Floki has taken note of the Securities and Futures Commission (SFC) of Hong Kong listing the Floki and TokenFi staking projects as "suspicious" on January 26, 2024, due to the excessively high annual interest rates of these two projects.
The cause of this situation is a misunderstanding of the calculation method for Floki's staking annual interest rate and how Floki maintains sustainable high returns. Floki is committed to compliance and values its relationship with regulatory authorities.
Floki outlined several steps taken to meet the expectations of regulatory authorities and explained the operation of its high annual interest rates.
Floki has issued a disclaimer on its website, warning Hong Kong citizens that they are not eligible to participate in the staking program until the issues with regulatory authorities are resolved. Additionally, technical measures have been implemented to block access to staking services from Hong Kong IP addresses. Furthermore, offline promotional activities within the jurisdiction were suspended in mid-December 2023.
Why are the annual returns so high?
The core issue of concern for the Securities and Futures Commission is the significantly high Annual Percentage Yield (APY) offered by the Floki and TokenFi staking programs.
In contrast to the traditional models of increasing supply or providing marginal returns from a limited token pool, the Floki program operates on a unique premise. It rewards participants with $TOKEN, the native token of its tokenization project TokenFi.
TokenFi is not a conventional platform but rather a pioneering project in the emerging tokenization industry, which is expected to reach a scale of $160 trillion by 2030. Larry Fink, the CEO of asset management firm BlackRock, has referred to tokenization as the future of the market and believes it to be bigger than a Bitcoin ETF.
The high APY of the Floki staking project is due to the majority of TokenFi's supply being allocated to Floki stakers. Floki allocates the majority of TokenFi supply to its stakers. This ensures a sustainable high level of APY and ensures that the true supporters of the project receive the majority of the tokens, not just investors or early buyers.
Sustainability and Decentralization
High returns naturally raise sustainability concerns. While the APY is indeed influenced by market conditions and the potential demand for $TOKEN, it is designed to be self-adjusting.
The rewards are based on market value, and for TokenFi, its market value has experienced significant growth since its inception, as the market views it as a highly promising project.
The Floki and TokenFi staking systems operate independently on the blockchain, meaning they can continue to operate even if the team is not present, and users can continue to govern. The same rules apply to everyone, demonstrating a high regard for fairness and decentralization.
Importantly, the value of $TOKEN comes from the growth of TokenFi and people's trust in it. Therefore, the annual interest rate will fluctuate with changes in the token's market value. In simple terms, the rewards from staking demonstrate the community's enthusiasm for TokenFi, rather than the token's instability.
Engaging with Regulation
Despite facing regulatory challenges, the Floki team emphasizes their commitment to collaborating with regulatory authorities to address their concerns.
Floki believes that cooperation with regulatory authorities is not adversarial but cooperative, both in spirit and in practice. "Our approach is to strike a balance between innovating financial products and responsibly engaging with regulatory oversight in the digital asset space."
About TokenFi
TokenFi is the sister token of Floki and an integrated tokenization platform that allows users to easily launch tokens or tokenize real-world assets (RWA). TokenFi is dedicated to changing the trillion-dollar tokenization industry by providing a user-friendly interface that does not require programming expertise.
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