Earlier this year at Bitcoin Asia in Hong Kong, there was a growing sense of frustration with digital asset treasury (DAT) companies and how they are lagging behind in performance compared to the assets they fill their coffers with.
“Just buy an ETF,” is how Matt Cole, CEO of Strive Asset Management, put it during a panel at the conference.
But in Japan, this is not the case. Indeed, Tokyo-listed DATs consistently outperform bitcoin due to the local tax treatment of stocks compared to cryptocurrencies.
These bonuses are not random. They are an expression of Japan’s tax incentives, which punish direct crypto gains but reward stock gains with lower rates and loss offsets.
In Japan, cryptocurrency profits are treated as miscellaneous income, grouped with wages and other income, and taxed at progressive rates of up to 55% for higher incomes.
These gains cannot be offset against losses from other sources and cannot be carried forward. Stock profits are in an entirely different category. They are taxed separately at around 20%, with loss carryforwards allowed and much simpler reporting requirements. The difference creates an obvious financial incentive: Holding bitcoin directly risks incurring a high tax bill, while holding bitcoin-related stocks keeps gains in the low-tax equity bracket.
Investors who want to gain exposure to Bitcoin without paying a 55% tax bill have no choice but to bid on the shares of companies that hold BTC. U.S. companies operate in a tax-neutral environment, so their stocks rarely trade much higher than their BTC holdings.
At the same time, the Tokyo Stock Exchange and the Japan Exchange Group are growing increasingly concerned about the volatility their own tax regime has helped fuel, CoinDesk previously reported, as they have begun warning companies about backdoor listing tactics, tightening audits and signaling that the DAT model may expose retail investors to risks they don’t fully understand.
Similar discussions are taking place elsewhere in Asia, with regulators in Hong Kong, India and Australia reportedly concerned about the structure and discouraging listed companies from implementing the strategy.
In Japan, DATs may soon lose their luster as the country’s tax authority considers changes 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” might just be the advice that also works in Japan.
