Asian stock exchanges begin to "resist" digital asset treasury companies, with reports saying the Hong Kong Stock Exchange has already rejected at least five.

``` A once-popular corporate strategy in the market is now facing collective resistance from Asia’s major stock exchanges. According to media reports, regulators and exchanges in several key markets—including Hong Kong, India, and Australia—are rejecting or restricting listing applications from companies seeking to buy and hold large amounts of cryptocurrency as their core business, casting a shadow over the future of this model. According to media reports on Wednesday citing anonymous sources, the Hong Kong Stock Exchange has recently rejected listing applications from at least five companies aiming to become Digital Asset Treasury (DAT) companies. The main reason given by the HKEX is the application of rules against "cash companies," intended to limit the listing of entities mainly holding liquid assets. This trend is not unique to Hong Kong. Last month, the Bombay Stock Exchange in India rejected the listing application of a company after it announced plans to invest fundraising proceeds into cryptocurrencies. In Australia, the local stock exchange (ASX) has rules prohibiting listed companies from allocating more than half their balance sheet to cash-like assets (including cryptocurrencies), making the digital asset treasury business model "virtually impossible" to achieve. A direct consequence of these regulatory actions is that the market performance of such companies has been severely pressured. With the recent deep pullback in the cryptocurrency market, the share prices of many digital asset treasury companies have continued to fall, even dropping below their net asset value (NAV), raising doubts among investors about the sustainability of their business model. HKEX Invokes “Cash Company” Rule, India and Australia Take Similar Restrictions Reports state that HKEX’s rejections are fundamentally rooted in concerns over “cash companies” or “shell companies.” Regulators prefer that listed companies have substantial operating businesses, rather than simply being investment vehicles holding liquid assets. The report also points out that some exchanges fear these companies may not be running legitimate businesses, but are instead “selling their listed status” in disguise. Moreover, companies primarily holding highly liquid assets such as cryptocurrencies are structurally similar to shell companies that could be used for improper purposes, which is a red line for regulators. In India, the Bombay Stock Exchange has demonstrated its cautious stance by rejecting companies with clear plans to invest in cryptocurrencies. In Australia, the regulatory framework is even clearer. An ASX spokesperson said that for ASX-listed companies turning to invest in cryptocurrencies, the exchange "encourages them to consider structuring their products as exchange-traded funds (ETFs)." Japan Stands Out, But Index Risks Loom Among Asia’s major markets, Japan is a clear exception. Japanese stock exchanges are open to the concept of digital asset treasury companies, provided they make appropriate disclosures. Currently, Japan has the highest number of listed Bitcoin-holding companies in Asia, reaching 14, including Metaplanet, the world’s fourth-largest Bitcoin treasury company. However, even in Japan’s relatively more relaxed regulatory environment, new risks are emerging. MSCI, one of the world’s largest index providers, is proposing to remove large digital asset treasury companies that hold over 50% of assets in cryptocurrencies from its indices. If this proposal is eventually implemented, it could cut off flows of passive investment funds, impacting these companies’ stock prices. As regulations tighten, the market is also reassessing the digital asset treasury model. Earlier in 2024, this model was seen as a major driver of the cryptocurrency market’s rally, but now many companies are struggling. According to research firm 10x Research, with the share price collapse of companies like Metaplanet, “the era of financial wizardry for Bitcoin treasury companies is coming to an end.” Industry insiders have also confirmed the market’s pessimism. Tom Lee, chairman of BitMine, suggested earlier this month that the bubble in digital asset treasury companies may have already burst. With poor stock performance and ever-higher exchange listing barriers, this model—once regarded as an innovation in corporate balance sheets—is facing increasing pressure. Risk Warning and Disclaimer Markets are risky, and investments should be undertaken cautiously. This article does not constitute personal investment advice nor does it take into account the individual investment objectives, financial situation, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing accordingly is at your own risk. ```