Japan Exchange Group Considers Stricter Rules for Crypto Treasury Firms

TLDR

• Japan Exchange Group is considering stricter rules for companies with large cryptocurrency holdings to ensure investor protection.
• The Tokyo Stock Exchange operator may impose new audits and review backdoor listing rules for firms shifting focus to crypto.
• Three companies have paused their plans to acquire cryptocurrencies following pushback from JPX over potential fundraising restrictions.
• Firms with significant crypto holdings, like Strategy Inc. and Metaplanet, have seen their stock values plummet after earlier gains.
• JPX is closely monitoring digital-asset treasury companies to address rising governance and risk concerns.

The Japan Exchange Group (JPX) is evaluating tighter measures for listed digital-asset treasury companies. This comes as losses from cryptocurrency hoarding raise concerns over investor protection. JPX is considering changes to its backdoor listing rules and may require additional audits for firms increasing crypto holdings. However, no final decisions have been made.

Backdoor Listing Rules Under Review

The operator of the Tokyo Stock Exchange is reassessing its stance on backdoor listings. JPX is considering imposing stricter requirements on companies that shift their focus to crypto accumulation. Currently, backdoor listings involve going public through a merger instead of a traditional IPO. The exchange already bans such listings, but it may apply this prohibition to companies that are pivoting their business models to crypto.

JPX’s review follows growing concerns about the impact of large-scale crypto acquisitions by publicly listed companies. The exchange is focused on protecting shareholders and ensuring good governance practices. A JPX spokesperson mentioned that they are monitoring companies with potential risks to investors.

JPX Warns Firms Against Aggressive Crypto Moves

Shares of companies with large cryptocurrency holdings have fallen sharply. Strategy Inc., for instance, saw its stock drop about 50% since mid-July, following an earlier-year surge. The company had built a Bitcoin treasury valued at around $66 billion. Similarly, Metaplanet, Japan’s largest digital-asset treasury operator, has lost over 75% of its value from its June peak.

Metaplanet transitioned from the hotel business to crypto holdings in early 2024. The company accumulated more than 30,000 Bitcoin, making it one of the largest public holders. Convano, another firm aiming to acquire 21,000 Bitcoin, saw its stock fall by approximately 60% since August.

JPX has faced increasing pressure from these declines. As a result, the exchange has warned three companies against proceeding with plans to acquire cryptocurrencies. The firms were told their fundraising efforts could be restricted if they pursued aggressive crypto strategies.

Hong Kong Follows a Similar Approach

Across Asia, exchanges are scrutinizing digital-asset treasury listings more closely. Hong Kong’s exchange (HKEX) has questioned several firms aiming to list as core crypto treasuries. The Hong Kong regulator reiterated that listed businesses must remain viable and sustainable.

HKEX’s approach requires crypto holdings to be an integral part of the company’s operations. It also limits excessive holdings of liquid assets to protect investors. Japan Exchange Group’s actions align with this regional trend, highlighting rising caution among listed companies about crypto accumulation.

JPX’s recent moves underline a growing trend in Asia of tightening rules for companies with large cryptocurrency positions. As global regulators continue to monitor these developments, the future of digital-asset treasury companies remains uncertain.

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