Digital asset treasury companies in Japan are at risk as the Japan Exchange Group Inc., which operates the Tokyo Stock Exchange, wants to tighten oversight over concerns that retail investors are being exposed to excessive risk from volatile crypto-linked stocks.

People familiar with the development told Bloomberg that the group may ask listed firms that stockpile crypto to undergo fresh audits and implement a stricter disclosure regime; however, those plans remain tentative and under internal discussion at the moment.

The group is also mulling ways to curb backdoor listings, a method that involves a private company becoming publicly traded by merging with or acquiring an already listed firm. Currently, this approach is already restricted under existing rules, but the exchange is now considering whether it should be applied to listed companies that have taken up a crypto-focused treasury strategy.

Japan is home to several digital asset treasury firms like Metaplanet Inc., which is the largest public Bitcoin holder in the country, alongside a number of other firms that have adopted similar strategies as demand for crypto exposure continues to grow among investors.

However, over the past months, many of these digital asset treasury firms, including Strategy, the largest corporate Bitcoin holder, have seen their share prices tumble as market enthusiasm faded. Metaplanet, for instance, has dropped more than 70% from its June peak, even though it had surged over 400% earlier in the year on the back of aggressive Bitcoin purchases.

Similarly, Convano Inc., a nail salon chain that announced plans to acquire tens of thousands of Bitcoin, has seen its stock fall by around 60% since late August.

So far, no formal decision has been announced, but some entities have been warned by the exchange that they risk fundraising restrictions if they pursue crypto accumulation as a core business strategy. As a result, at least three companies have put their plans on hold but have not publicly disclosed the reason, the sources added.

According to a Japan Exchange Group insider, their goal is to safeguard investors and ensure listed firms remain grounded in their stated business activities. The operator is currently only “monitoring companies that raise concerns from a risk and governance perspective,” they said.

Digital asset treasury firms under pressure

Crypto hoarding firms have faced similar hiccups across some other jurisdictions in Asia.

Last month, the Hong Kong Exchanges & Clearing Limited reportedly blocked at least five companies that were looking to pivot their core operations toward holding digital assets as treasury reserves. 

Similar actions were taken in India, where the Bombay Stock Exchange rejected Jetking Infotrain’s proposal to invest proceeds from a preferential share issue into cryptocurrencies.