Asian Stock Exchanges Tighten Rules on Digital Asset Treasuries Amid Regulatory Push

Executive Summary

Major stock exchanges in Hong Kong, India, and Australia are increasingly resisting the integration of Digital Asset Treasury (DAT) companies, citing concerns over "cash company" and "shell company" regulations. This coordinated pushback includes rejections of listing applications and stringent rules on crypto asset holdings. Concurrently, MSCI, a prominent index provider, is proposing to exclude DATs with substantial crypto holdings from its global indexes, a move that could significantly impact passive investment flows into these companies. This signals a broader tightening of the regulatory environment for corporate crypto holdings across these key Asian markets, potentially leading to increased volatility for existing DATs and a re-evaluation of institutional investment strategies in digital assets.

The Event in Detail

The Hong Kong Exchanges & Clearing Ltd. (HKEX) has reportedly rejected at least five companies aiming to operate as Digital Asset Treasuries. This decision is primarily based on the exchange's "cash company" rule, which restricts firms from holding excessive liquid assets.

In India, the Bombay Stock Exchange (BSE) rejected the public listing application of Jetking Infotrain, an IT training company. The rejection stemmed from Jetking's stated intention to allocate ₹3.96 crore ($475,000), representing 60% of its raised capital, towards virtual digital assets (VDAs). The BSE's decision followed an initial in-principle approval, which was subsequently held for a "policy level" review concerning VDA investments.

The Australian Securities Exchange (ASX) maintains a policy that effectively impedes the DAT model by prohibiting listed entities from holding more than 50% of their balance sheets in cash or cash-like assets. As a result, software firm Locate Technologies Ltd., which had begun acquiring Bitcoin, is reportedly relocating its listing to the NZX in New Zealand, where the regulatory environment is perceived as more accommodating to DATs. An ASX spokesperson suggested that companies seeking crypto exposure should consider structuring it through exchange-traded funds (ETFs) to align with listing standards.

Further amplifying these concerns, MSCI, a leading global index provider, has proposed the exclusion of large DATs—defined as companies with 50% or more of their total assets in crypto holdings—from its global indexes. This proposal follows an inquiry triggered by Metaplanet's US$1.4 billion international equity sale, a significant portion of which was allocated to Bitcoin purchases. Metaplanet has since acquired an additional 10,687 tokens. MSCI's rationale is that DATs "may exhibit characteristics similar to investment funds," which are generally ineligible for its indexes.

Market Implications

The actions by these exchanges and MSCI directly impact the financial mechanics of capital formation for DATs. The BSE's rejection of Jetking Infotrain's share issuance illustrates a direct impediment to deploying capital into crypto assets via publicly listed companies. MSCI's proposed exclusion is particularly significant, as it would, according to Japan equity analyst Travis Lundy, eliminate "passive inflows from funds that track the indexes," thereby challenging the "premium to book argument" for DATs.

From a business strategy and market positioning perspective, this regulatory pushback directly challenges the "regulatory arbitrage and capital formation flywheel" that DATs have represented for institutional investors unable to directly own digital assets. The relocation of companies like Locate Technologies Ltd. to jurisdictions like New Zealand highlights a strategic search for more permissive regulatory environments. This contrasts with Japan, which currently allows listed companies greater flexibility in adopting digital-asset treasury strategies. The overall "crypto treasury model," which has been a driver in digital asset markets, is now facing considerable pressure, with many DATs reportedly trading at or below their Net Asset Values (NAVs).

The broader implications for the Web3 ecosystem suggest a tightening global regulatory landscape, especially within major Asian financial hubs. While these measures do not constitute an outright ban on cryptocurrencies, they encourage corporate crypto holdings to gravitate towards more traditional, regulated investment vehicles such as ETFs, as indicated by the ASX. This development could curtail direct institutional investment avenues through publicly listed DATs, potentially influencing broader market demand for digital assets if this trend expands beyond Asia. It signals a move towards enhanced regulatory clarity but introduces volatility and strategic shifts for companies operating in the DAT space.

Expert Commentary

Travis Lundy, a Japan equity analyst at Smartkarma, commented on MSCI's proposal, stating it "could kill the premium to book argument" for DATs, underscoring the potential impact on their valuations. A spokesperson for the BSE indicated that their decision regarding Jetking Infotrain was made at a "policy level with the Regulator" following "revised norms." Siddharth Bharwani, Co-Managing Director and CFO of Jetking, confirmed the company is exploring all appropriate responses, including a potential appeal to the Securities Appellate Tribunal.

Broader Context

The resistance encountered by DATs is rooted in concerns that these entities, whose primary business involves holding large digital asset portfolios, could be seen as "cash companies" or "shell companies" rather than operational businesses. This regulatory stance marks a shift from a period where the crypto treasury model gained traction, significantly influencing digital asset market activity.

This development is expected to lead to a decrease in institutional investment via the DAT model and may compel companies to either adopt alternative structures, such as ETFs, or seek listing in jurisdictions with more favorable regulatory frameworks. The long-term outlook points towards a more extensively regulated environment for corporate crypto holdings, potentially fostering greater market stability but simultaneously limiting certain growth trajectories and investment avenues previously explored by DATs.