Japan is considering stricter regulation of listed firms that have drifted more toward cryptocurrency assets, with such losses casting questions over investor safety and corporate governance.
Japan Exchange Group has begun considering whether rules are currently adequate in dealing with the risk of companies becoming digital-asset treasury operators. The review comes after the burst of volatility in the market, which has struck crypto-laden balance sheets in the country.
According to a Bloomberg report, the Tokyo Stock Exchange operator is deliberating on enforcing its backdoor listing policies more rigidly and might demand additional audits of companies that have accumulated sizeable crypto holdings.
Sources close to the talks claimed that no final solution has been reached, but it is directed towards greater supervision.
JPX has directly warned at least three listed companies to cancel their intentions to start purchasing cryptocurrencies in the last two months.
This exchange informed these companies that their financing may be capped in case their approaches prioritized the acquisition of digital resources. Rather than the development of a sound business foundation.
JPX signals funding limits for crypto-focused firms.
JPX does not prohibit firms from owning crypto. Nevertheless, a spokesperson indicated that the exchange is reviewing companies that have risk-management or governance issues. And the aim is to cushion shareholders against abrupt changes that put them at risk of volatile markets.
Retail investors who purchased into the recent crypto-hoarding trend have suffered massive losses. Strategy Inc., which accumulated a Bitcoin treasure trove of approximately $66 billion, has experienced a more or less 50% decrease in its share price since mid-July.
Other crypto-oriented companies have experienced similar falls following the fast surges earlier in the year.
Hong Kong and other regional markets have not approved the new firms wishing to act as digital-asset treasuries. According to industry observers, there are currently 14 publicly traded Bitcoin-buying companies in Japan, the most in Asia.
Backdoor listings are also prohibited in Japan. Such listings enable mergers with companies as opposed to the conventional IPOs.
JPX is currently considering whether companies that shift their primary business to cryptocurrency should also be subject to similar limits. As this transition can pose risks comparable to those associated with backdoor listings.
Japan’s biggest digital-asset holders suffer steep losses
Metaplanet, the biggest operator of digital-asset treasury in Japan, has fallen by over 75% since its high in the middle of June, having risen by 420% earlier in the year.
In early 2024, the company sold off its hotel operation and held over 30,000 Bitcoin. Which at that time made it one of the largest public Bitcoin holders in the world.
Convano, a nail salon owner planning to purchase 21,000 Bitcoin, has fallen by almost 60% since the end of August. Non-Bitcoin strategies are also plunging down into losses. Evernorth, an XRP project, has an unrealized loss of approximately $78 million shortly following developing its position.
Even big players such as Strategy Inc. have been rattled by price volatility. Meanwhile, the Hong Kong exchange suspected that at least five other applications were seeking to establish digital-asset treasuries, which would remind businesses of their sustainability and viability.
HKEX continues to restrict excessive liquid-asset concentrations as well just to minimize sudden market shocks.
The Japan review reflects a wider local change in which regulators are trying to manage pivot businesses in a more speculative context and also protect investors against increased digital volatility.