DATCO – A New Digital Asset Treasury Model for Public Companies
DATCO – A New Digital Asset Treasury Model for Public Companies
An emerging category of public companies known as DATCOs (“Digital Asset Treasury Companies”) are firms that hold cryptocurrencies and other digital assets such as stablecoins and tokenized T-bills as reserves.[1] This year, DATCOs collectively hold hundreds of billions of dollars in these assets.
What differentiates a DATCO from a traditional company is how its core business model is centered on the accumulation and management of such digital assets on their balance sheet.[2] Many elements of a DATCO are like a traditional company, because they must register fully with the SEC. Currently, the SEC continues to apply their traditional rules to digital assets. DATCOS must make full disclosures and avoid being deemed an “investment company.”[3]
However, DATCOs operate on the assumption that the market conditions will be most favorable. When such conditions are favorable, DATCOs experience a rapid growth that is compelling for its investors. However, DATCOs can experience a “death spiral,” where the sequence starts with (1) crypto correction, (2) amplified stock decline, (3) premium collapse, (4) funding crisis, (5) debt pressure, (6) forced selling (companies liquidating crypto), and lastly, (7) cascade effect (more forced selling due to low crypto prices).[4]
Although DATCOs are new market participants, they are subjected to the same rules as other listed companies, which include fair disclosure, insider trading, market manipulation, and custody requirements.[5] Ultimately, this demonstrates how traditional securities regulations are applied to new types of public companies and how DATCOs are changing the corporate treasury landscape.
[1] Jeff Gapusan, “The Rise and Reality of Digital Asset Treasury Companies,” FORBES, https://www.forbes.com/sites/digital-assets/2025/09/23/the-rise-and-reality-of-digital-asset-treasury-companies/
[2] Id.
[3] J. Michael Bresnahan Jr. and Patrick Daugherty, “Digital Asset Treasury Companies: Structure and Regulation,” The National Law Review, https://natlawreview.com/article/digital-asset-treasury-companies-structure-and-regulation
[4] The DATCO Machine – The Weight of Wishful Thinking, GATE, https://www.gate.com/tr/learn/articles/the-datco-machine-the-weight-of-wishful-thinking/12736
[5] J. Michael Bresnahan Jr. and Patrick Daugherty, “Digital Asset Treasury Companies: Structure and Regulation,” The National Law Review, https://natlawreview.com/article/digital-asset-treasury-companies-structure-and-regulation
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Ellen Lee is an associate in the New York office of Faruqi & Faruqi LLP and focuses her practice on securities litigation. She is currently awaiting admission in New York.
