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 relative to the assets they fill their coffers with.
“Just buy an ETF,” is how Strive Asset Management CEO Matt Cole put it on stage during a panel at the conference.
But in Japan this is not the case. In fact, DATs listed in Tokyo consistently outperform bitcoin due to the local tax treatment of stocks vs. crypto.
These prizes are not random. They are an expression of Japan’s tax incentives, which penalize outright crypto gains but reward equity gains with lower rates and loss offsets.
Crypto profits in Japan are treated as miscellaneous income, lumped together with wages and other income, and taxed at progressive rates that can reach 55% for the highest earnings.
These gains cannot be offset against losses from other sources and cannot be carried forward. Share profits are in a completely different category. They are taxed separately at around 20%, with loss carry forwards allowed and with much simpler reporting requirements. The difference creates a clear financial incentive: holding bitcoin directly risks a high tax bill, while holding a bitcoin-linked stock keeps any gains in the lower-tax stock bucket.
Investors who want Bitcoin exposure without the 55% tax bill have little choice but to bid up the shares of companies that own BTC. US companies operate in a neutral tax environment, so their shares rarely trade far above their BTC holdings.
At the same time, the Tokyo Stock Exchange and Japan Exchange Group are growing increasingly uneasy about the volatility their own tax regime helped fuel, CoinDesk previously reported, as they have begun warning companies about backdoor listing tactics, tightening audits and signaling that the DAT model could expose retail investors to risks they don’t fully understand.
Similar talks are taking place elsewhere in Asia, with regulators in Hong Kong, India and Australia reportedly concerned about the structure and discouraging listed companies from going through with the strategy.
Back in Japan, DATs may soon lose their luster as the country’s tax authority is considering a change to the tax treatment of crypto.
If this happens, without the tax benefit, Tokyo-listed DATs will quickly lose their luster. “Just buy an ETF” may end up being the advice that also works in Japan.
