Earlier this year, at Hong Kong’s Bitcoin Asia, there was a growing sense of frustration with Digital Asset Treasury (DAT) companies and their lagging performance compared to the assets they hold.
“Just buy an ETF,” is how Strive Asset Management CEO Matt Cole put it during a panel at the conference.
However, in Japan, the scenario is different. DATs listed in Tokyo consistently outperform bitcoin due to the local tax treatment of equities compared to crypto.
These premiums are not accidental; they reflect Japan’s tax incentives, which penalize direct crypto gains but reward equity gains with lower rates and loss offsets.
In Japan, crypto profits are categorized as miscellaneous income, taxed at progressive rates that can reach 55% for the highest earners. These profits cannot be offset with losses from other sources and cannot be carried forward. In contrast, equity profits are taxed separately at about 20%, allowing loss carryforwards with simpler reporting requirements. This difference creates a clear financial incentive: holding bitcoin directly risks a high tax bill, while owning a bitcoin-linked stock keeps gains within the lower-tax equity category.
Investors wanting Bitcoin exposure without the hefty tax implications have limited options but to elevate the shares of companies that hold BTC. American firms operate in a neutral tax environment, so their stocks rarely trade significantly above their BTC holdings.
Meanwhile, the Tokyo Stock Exchange and Japan Exchange Group are increasingly concerned about the volatility their own tax policies have induced, as they have started warning companies about backdoor listing tactics, tightening audits, and signaling that the DAT model may expose retail investors to risks they don’t fully comprehend.
Similar discussions are taking place across Asia, with regulators in Hong Kong, India, and Australia reportedly worried about the structure and discouraging listed companies from pursuing this strategy.
In Japan, however, DATs may soon lose their appeal as the country’s tax authority considers revising the tax treatment of crypto.
If this change occurs, the lack of tax advantages could diminish the allure of Tokyo-listed DATs. The advice to “just buy an ETF” may become relevant in Japan as well.
Leave a Reply