TechFlow by TechFlow Podcast Source: Bonnie Blockchain
David: Today we have invited Simon Gerovich, President of Metaplanet, to discuss with us the future development of Bitcoin asset holdings and the potential application of Bitcoin in the hotel industry.
Bonnie: The latest news today is that Metaplanet's Bitcoin premium has reached nearly $600 per coin. Some articles say this price is too high. What are your thoughts? Is the MNAV indicator a good metric for evaluating Bitcoin asset companies?
Simon: Many key performance indicators have been proposed recently for evaluating Bitcoin asset companies. Among them, I believe the "Bitcoin yield" is the most important one, reflecting the number of Bitcoins held per share and the rate of growth. This metric has become a common tool for sell-side analysts, and Bitcoin asset companies around the world are now using similar evaluation methods. Therefore, when evaluating a company, it is not enough to rely solely on a single metric; a comprehensive consideration of multiple factors is necessary.
MNAV (Net Market Asset Value) is an important reference metric. It is calculated by adding the enterprise value of a company's market capitalization to its debt, divided by the number of Bitcoins it holds. This metric fluctuates with market interest in a company's stock and the activities it undertakes. I believe Metaplanet's premium is justified. For example, for investors who wish to hold Bitcoin directly, tax policies vary significantly across countries. In Japan, for example, ordinary investors who directly purchase Bitcoin are subject to personal income tax of up to 55%. By purchasing shares in a publicly listed company like Metaplanet, investors can indirectly hold Bitcoin in a more tax-friendly manner.
This also drives our flywheel effect. The rationality of our MNAV depends on multiple factors, the most critical of which is the company's ability to increase the number of Bitcoins per share. We are currently one of the fastest-growing companies in this field globally, particularly in terms of increasing Bitcoins per share. We are committed to maintaining an MNAV between 3 and 5. This ensures that we neither depress the stock price through excessive share issuance nor effectively increase the value of each Bitcoin, thereby creating greater benefits for all shareholders.
Dilemma
Bonnie: Based on your point, I'm struck by a dilemma. Some companies are cash-rich and healthy, while others are struggling. These struggling companies might choose to transform into Bitcoin treasuries, as they offer minimal risk and potentially significant returns. If these companies' stock prices soar, even surpassing those of previously healthy companies, how do you envision this situation developing?
Simon: I find it interesting that Bitcoin Treasury companies offer an indirect investment channel for investors who otherwise would otherwise struggle to directly access Bitcoin. After all, almost everyone has a brokerage account, and buying stocks is a familiar process. But getting people to open an exchange account requires additional steps. Furthermore, given past incidents of cryptocurrency exchanges being hacked, many people may be deterred from Bitcoin and cryptocurrencies. Furthermore, some traditional investor funds aren't allowed to buy Bitcoin directly, but they can buy shares in publicly traded companies. Therefore, I believe Bitcoin Treasury companies' innovation in this area is a game-changer. This trend is like a capital black hole, attracting massive amounts of capital to Bitcoin through Bitcoin Treasury companies.
Of course, extreme caution is required when selecting a Bitcoin finance company. A company's track record will become increasingly important. For example, we have a 14-month track record, while Microstrategy has a five-year track record. Furthermore, the CEO's attitude is crucial. For example, do they truly believe in Bitcoin? Will they sell their existing Bitcoin?
This reminds me of a conference I attended in Tokyo a few weeks ago, focusing primarily on Japanese stocks. Someone asked me, "What else would you invest in besides Bitcoin?" I flashed a look of disgust, which was captured by many people and shared on social media. But I want to emphasize that Metaplanet only invests in Bitcoin and never in any other asset class, and we will never sell our Bitcoin. Michael Saylor has consistently conveyed the same message. So, if you're considering investing in Bitcoin treasury companies, you need to ensure they're fully committed to not only not selling Bitcoin but also making every effort to continuously increase their Bitcoin reserves.
Metaplanet's capital structure changes
David: Simon, could you tell us about the initial stages of your company's transformation? You mentioned that it began as a struggling hospitality business, which is interesting. How did you initially raise the capital to buy Bitcoin? How has your approach to funding evolved over the years?
Simon: We owned a portfolio of hotels, and during our initial meetings to discuss transitioning to a Bitcoin asset company, we decided to sell some of them to raise initial capital. We also secured funding from a number of like-minded investors, some of whom are here today. For example, UTXO Management, a sponsor of the Bitcoin conference, became an early shareholder. We also had an excellent board of directors, many of whom had participated in our private placement.
At the beginning of last year, we used the funds we raised to complete our first round of Bitcoin purchases, followed by a rights issue. A rights issue is when a company offers existing shareholders the opportunity to purchase new shares. Traditionally, rights issues are viewed as a negative sign, as they are typically only undertaken when a company is in dire need of funds.
But looking back, it was actually the smartest move we made at the time. We had approximately 13,000 to 14,000 shareholders, who filled out extensive paperwork and provided us with funds to purchase Bitcoin. This also established an initial connection between our Japanese shareholders and the company, as their funds were used directly to purchase Bitcoin. If you buy shares on the market today, you're essentially buying shares from other sellers; but when you subscribe for new shares, the money goes directly to the company, giving you the perception that the funds were specifically used to help the company purchase Bitcoin. That's how we operated at the time.
This happened last summer, when we raised around $60 to $70 million. By the end of the year, we launched our first "mobile exercise warrants." These warrants are a financing mechanism similar to at-the-market equity offerings in the US. In the US, companies can sell new shares directly to the market, as Microstrategy does; however, this approach isn't feasible in Japan. So we structured mobile exercise warrants, issuing them to partners who then sell shares on the market and use the proceeds to exercise the warrants, ultimately receiving newly issued shares. Ultimately, this mechanism works similarly to an at-the-market equity offering in the US.
We've successfully raised significant capital through this process. We completed our first offering in December of last year, and our most recent offering launched in February of this year, which was exercised just last week. We officially announced that we raised approximately $600 million in equity through this operation. As the company scales, we'll be able to issue more shares and, therefore, purchase more Bitcoin. We plan to continue using a similar "at-the-mark" model.
Looking ahead, we may issue convertible bonds or preferred stock, but for now we are focused on equity financing, which is the most efficient method of financing because it is permanent capital that does not need to be repaid and can be used entirely to purchase Bitcoin.
A bunch of copycat Bitcoin companies?
Bonnie: Back to the topic you just raised. Clearly, Michael Saylor, like you, is a staunch Bitcoin supporter, and Bitcoin Treasury (the company holding Bitcoin on its balance sheet) has strong support from the Bitcoin community. Many people are seeing your success and want to emulate it. But you were one of the best-performing stocks globally last year, right? This makes it seem like a "secret code" for success. However, many people enter this space with the wrong mindset and claim to be Bitcoin companies. What are your thoughts on this?
Simon: Overall, it's a good thing that more companies are adopting the Bitcoin standard. I think this applies not only to companies like us that have been struggling, but also to successful companies that have a lot of idle cash.
Of course, there will always be some bad actors who see this as a quick way to get rich. They might think, "If Bitcoin can boost my stock price, why shouldn't I do it?" But I believe investors are rational. As more Bitcoin treasury companies emerge, it will become easier for investors to compare them, for example, by monitoring metrics like BTC yield (return on investment from Bitcoin) and Bitcoin holdings per share through platforms. Ultimately, companies that demonstrate strong execution, focus, and discipline will receive greater market recognition, while those that lack these qualities will be eliminated.
I recently saw a company announce a sale of Bitcoin, and I thought it was a bit foolish. They had just announced their Bitcoin purchases a few months prior, and now they're selling to realize some profits in the final quarter. This behavior severely damages their credibility, as investors will no longer view them as a stable Bitcoin investment. So, I think over time, the performance of different companies will gradually diverge, and investors will become more clear about which companies to support and why.
However, I also understand that different companies may have different motivations for including Bitcoin on their balance sheets. There are many complex factors to consider.
We will always continue to buy Bitcoin
David: Is there a price at which you would stop buying Bitcoin, or at least slow down your purchases? If Bitcoin hit $500,000 next week, would you still buy it, even if the price quintupled in a week?
Simon: I like your hypothesis. If Bitcoin reached $1 trillion tomorrow, we might consider it overvalued and in need of a reassessment, but our plan is to continue buying Bitcoin forever. However, as it stands, Bitcoin's price is nearing its all-time high. Bitcoin is a unique asset with a limited supply and increasing demand. As more people pay attention to Bitcoin, its price is likely to continue to rise over time.
If you ask us if we will ever sell Bitcoin, my answer is absolutely not. We want shareholders to have the freedom to decide when to buy or sell our shares. Our goal is to be the best leveraged proxy for Bitcoin, and our most important task is to maintain focus and discipline and stick to our plan. Regardless of market fluctuations, we will not change our position or make decisions that confuse investors.
Two stages of growth for Bitcoin asset companies
Bonnie: Michael mentioned that MSTR's leverage is equivalent to 1.5 times that of Bitcoin. Many investors assume that when Bitcoin prices reach their all-time highs, the share prices of MSTR or other Bitcoin treasury companies should also reach their all-time highs. Why hasn't this been the case in reality?
Simon: I think it's important to take a long-term perspective. Strategically, a company might be in the same position today as it was four or five months ago, but the biggest change is that they own significantly more Bitcoin per share. While the stock price may not fully reflect this, the actual value of the company has increased significantly.
Bonnie: That's right, but what I want to say is that many people don't really understand Bitcoin. So, how should they view Bitcoin? If you were to explain it to my grandmother in her seventies or eighties, what would you say?
Simon: If your grandmother is in her seventies or eighties, I probably wouldn't recommend holding Bitcoin for herself, but she could consider it a long-term investment for her children and grandchildren. We're still in the first phase of Bitcoin's journey, which could be called the "gold rush." During this phase, our goal is to accumulate as many Bitcoins as possible. The entire Bitcoin network has a total supply of only 21 million, and our company currently holds more Bitcoin than any other public company, leaving few if any to catch up. We aim to be the industry leader. In the second phase, when Bitcoin prices rise significantly, stock prices will truly reflect the true value of many public companies. During this process, supply and demand, Bitcoin price volatility, stock volatility, and the company's ability to execute financing will all have a significant impact on the outcome.
During this first phase, people need to understand that stock prices don't always reflect a company's intrinsic value. Just like in Amazon's early days, despite revenue growth, its stock price underperformed due to slim profits. At the time, Amazon reinvested most of its earnings in advertising, marketing, and network expansion. Therefore, I believe that any investor in Bitcoin Treasury shouldn't aim for short-term profits. Similarly, if you invest in Bitcoin, you shouldn't aim for short-term gains. However, over the medium to long term, Bitcoin Treasury has the potential to deliver higher returns by increasing the number of Bitcoins per share. By purchasing shares in Bitcoin Treasury, you allow the company to do the heavy lifting for you, such as storing and managing Bitcoins. In a few years, when you look back, you'll realize that your Bitcoin exposure has increased significantly.
Bitcoin asset companies are in the explosive growth phase
Bonnie: You mentioned earlier that we're in Phase 1, right? It's a Wild West gold rush, and we need to wait for Phase 2. So, when will Phase 2 arrive?
Simon: The second phase could arrive in three to five years, or even five to seven years. By then, Bitcoin will have achieved mass global adoption, and its price could surpass $1 million, perhaps even $5 million. Banks will then be able to custody Bitcoin. If you own a treasury, a stock portfolio, or even real estate, you can deposit these assets with a bank and use them to obtain a loan. Currently, this functionality isn't available in the Bitcoin space. While some banks have announced plans to offer Bitcoin custody services, it will take time for this to truly take hold and offer more attractive interest rates on Bitcoin.
In the second phase, Bitcoin will become a significant component of high-quality balance sheets. I envision holding trillions of dollars in Bitcoin on our balance sheet. This Bitcoin can be deposited with major banks, used to secure loans at low interest rates, and then used to acquire businesses focused on the Bitcoin ecosystem. For example, they could apply for digital banking licenses or acquire local banks to provide Bitcoin-related financial services. The possibilities in this second phase are endless, as holding Bitcoin as a high-quality balance sheet asset will open up entirely new avenues for growth.
International Game Theory
Bonnie: I was talking to the head of an Asian exchange the other day, and he mentioned a point: Since almost all transactions are now denominated in US dollar stablecoins, the US may have already gained an advantage in the Bitcoin space. Does this mean that other countries have fallen too far behind to catch up?
Simon: I believe Bitcoin's widespread adoption will take time. Furthermore, the US's approach to Bitcoin may be more deliberate than we realize. I believe the US is actually purchasing Bitcoin behind the scenes, but it's just not public. If every purchase were publicly announced, it would actually drive up the price, preventing them from buying more at lower prices. However, many countries are publicly disclosing their Bitcoin purchases. El Salvador and Bhutan are prime examples of countries that have publicly purchased Bitcoin. I've also learned that several countries in the Middle East are also announcing their Bitcoin holdings in various ways. Therefore, I believe that multiple "Bitcoin superpowers" will emerge in the future. While the US may be the largest Bitcoin powerhouse currently, I believe other countries also have the opportunity to gain a significant foothold in this space.
Through Metaplanet, we hope to help Japan become that country. Currently, Metaplanet is the largest Bitcoin holder in Japan and Asia. Through our efforts, we hope to encourage Japan to follow the US in the Bitcoin space. So, even if Bitcoin adoption seems slow right now, don't despair. Everything takes time, and that means there's still plenty of time to buy before prices become unaffordable for the average person.
You have to tell all your friends and family and everyone you care about that now is the time to buy Bitcoin.
Japan's unique market demand for Bitcoin
Bonnie: I remember you mentioned in an interview that if investors in the Japanese market want to get involved in Bitcoin assets, they basically need to go through your company. Is that right?
Simon: There are actually multiple options on the market. Investors can purchase Bitcoin directly through local exchanges, but doing so will result in a higher tax burden. Therefore, when investors seek a more tax-friendly way to invest in Bitcoin and achieve returns that exceed those of Bitcoin itself, they often choose us. The returns from directly purchasing Bitcoin depend entirely on Bitcoin price fluctuations; on the other hand, if investing through a US Bitcoin ETF, due to the correlation between the ETF and the Bitcoin price, investors' returns will generally not exceed the performance of Bitcoin itself. In contrast, the advantage of Bitcoin Finance is that we are an operating company and can flexibly utilize a variety of capital market tools, such as issuing stocks, convertible bonds, or preferred stocks, to effectively increase the value of each Bitcoin share.
Bonnie: What is the difference between the three metrics you mentioned - Bitcoin per share, BTC earnings, and BTC gain?
Simon: "BTC gain" refers to the growth in the number of Bitcoins per share over time. This year, our BTC gain is about 190%, which means we have successfully increased the number of Bitcoins per share by 190%.
"BTC gain" converts BTC gains into specific bitcoins. This is calculated by multiplying the amount of bitcoin held at the end of the previous period by the BTC gain. For example, our company has added approximately 3,500 bitcoins through Bitcoin operations this year (after accounting for dilution). Then, multiplying this 3,500 bitcoins by the current Bitcoin price yields "BTC dollar gain."
This metric is primarily intended to help traditional financial markets understand the actual value we're creating. This year, our BTC dollar gain is approximately $400 million. I prefer to view this as a reflection of profit. While it's not true accounting profit, it does demonstrate potential value creation. On an annualized basis, our BTC dollar gain could potentially reach $1 billion. So, what should be the valuation of a company that can create $1 billion in shareholder value annually?
The current challenge is that traditional financial markets have limited tools for evaluating companies. They can only use traditional metrics, such as revenue and profit. However, Bitcoin Finance is different from traditional operating companies. We do not have significant revenue or profitability in the traditional sense. Therefore, we need to use other valuation tools, such as BTC revenue, BTC gain, and BTC USD gain. These metrics can help analysts better understand the value created by our company.
Becoming a Bitcoin company Metaplanet
David: Before we delve into your philosophy on Bitcoin, I'd like to first share your thoughts on Metaplanet. Your company is often compared to Microstrategy, with some even calling you the "Microstrategy of Asia." What are your thoughts on this?
Simon: I'm deeply honored to be compared in this way. Michael Saylor has had a profound influence on me. I often mention that during the pandemic, when my hotel business was struggling, I found solace in listening to Michael Saylor's podcast. He shared his vision for how public companies could transform and embrace Bitcoin, which was almost unimaginable at the time.
This inspired me to make a decisive move to transition from our struggling hotel business, and over the past year, adopting Bitcoin as our core treasury asset has completely transformed our situation.
David: As you pushed for this transition, did you experience any resistance from investors? How did you address this resistance, especially given that Bitcoin was a completely new asset class unrelated to your core business?
Simon: It was a blessing in disguise, really. Our operating conditions were so bad that we had little choice but to pivot. The board and shareholders told me, "Simon, think of something. Anything to save the company is fine." As a result, I didn't encounter much opposition from the board.
But it reminds me of a few years ago, when the company was doing well, I proposed to the board that we accept Bitcoin in our hotels. At the time, it seemed like a very natural next step, but I was laughed at by the board.
They asked me why I would risk our business with such an unpopular currency like Bitcoin. So, I abandoned the idea. But I kept wondering if there would be a future opportunity to integrate Bitcoin into our core business. Ultimately, we found the right time to do so.
Local Currency and Bitcoin
David: How much of a role does the performance of your domestic currency play in your new Bitcoin acquisition strategy? For example, over the past 15-20 years, the Japanese Yen has consistently depreciated against the US dollar and a basket of other currencies. Would you have made this shift if that hadn't happened?
Simon: Absolutely. I think Bitcoin is an unparalleled superior monetary asset. There is no other asset in the market that can compare to it. If you are in a market where the currency is devaluing, such as the United States, you will find a lot of people talking about the excessive printing of dollars and the country's huge debt burden.
The situation in Japan is similar. Many G7 countries face similar challenges. Japan is the most indebted country in the world as a percentage of GDP, a significant decline. The purchasing power of the yen has plummeted. Many Japanese people used to be proud to take a Hawaiian vacation, but now that's difficult to do due to the yen's devaluation. However, I believe this isn't just a problem with the yen or the dollar, but with the entire fiat currency system. Governments can print these currencies at will, meaning your hard-earned wealth can be diluted by the arbitrary printing of currency. Therefore, fiat currencies are not an ideal long-term store of wealth.
Bitcoin and Deflation?
David: We all know that Bitcoin is considered inflation-proof. But what about deflationary conditions? For example, Japan experienced deflation in the early 1990s and later. If the purchasing power of cash increases over time in such an environment, what theoretical value and demand does Bitcoin have as an asset?
Simon: That's a very insightful question. However, I think prices are starting to recover. Japan experienced a massive asset bubble, largely driven by postwar economic reconstruction. I remember when I lived there in the 1980s, people were writing books about Japan being "number one in the world." I hope Japan will one day reach those heights again. But it certainly came off an absolute peak, and now inflation is back.
In an environment where the value of a currency rises over time—in other words, a deflationary environment—the reasons to buy Bitcoin might seem less compelling. However, Bitcoin possesses a key characteristic: its total supply is fixed at 21 million. Even appreciating currencies cannot directly compare to this characteristic of Bitcoin. Therefore, Bitcoin's value is not dependent on any single monetary system; it can exist independently. Compared to the global phenomenon of massive money printing and inflation, Bitcoin is undoubtedly the best store of value currently available.
Why don’t people just buy Bitcoin directly?
Bonnie: You own so many bitcoins. How do you ensure the safety of these assets?
Simon: A significant advantage of Bitcoin Treasury is that it helps users overcome many of the technical barriers to holding Bitcoin. As we mentioned earlier, losing your private key means your Bitcoin is permanently lost. This isn't like recovering your bank password over the phone. Once you lose your Bitcoin, it's irrecoverable. Therefore, if you choose to invest in Bitcoin Treasury, or invest in Bitcoin through an ETF, you can rest assured that your Bitcoin assets are in safekeeping.
In fact, many Bitcoin holders do not share their private key information with their spouses or children. If something unexpected happens, these Bitcoins may be lost forever.
As a company, we place great importance on transparency. We publish all of our Bitcoin public addresses on our dashboard. This practice is crucial to earning the trust of our investors and Japanese shareholders. Furthermore, we are legally required to hold our Bitcoin in a third-party custodian approved by regulators, and we strictly adhere to this regulation. As our Bitcoin holdings increase, we will add more professional custodians to ensure the security of our assets. We always select the best custodians and diversify our assets across multiple institutions to mitigate risk.
Will Bitcoin asset companies never sell?
Bonnie: If a company claiming to be a Bitcoin reserve company actually buys low and sells high, and they're very good at it, what impact does this have on the system? We all agree with Michael Saylor's long-term Bitcoin holding strategy, but if I choose to sell my Bitcoin, what consequences will there be, besides disappointing investors?
Simon: Then you're not really a Bitcoin reserve company. I think a company that trades Bitcoin is more like a Bitcoin hedge fund. The main purpose of a Bitcoin hedge fund is to profit in the Bitcoin market through various trading strategies, and there are indeed many investment tools on the market that can help you achieve this.
I know some tools focus on using Bitcoin-related trading strategies to generate returns, but this is completely different from the philosophy of Bitcoin Reserve. We need to increase the number of Bitcoins per share over time, which requires continuous accumulation of Bitcoin, not selling it.
Would you like to pay with Bitcoin?
David: Why don’t hotels accept Bitcoin as payment for rooms now? Will this change in the future?
Simon: This reminds me of the Bitcoin pizza story. In the early days, someone bought two pizzas for 10,000 Bitcoins, and then the price of Bitcoin soared to a million dollars. If you paid for a night's room with Bitcoin, and Bitcoin went to $1 million, that would become a very expensive room for one night.
David: It's hindsight, but you can't predict what the price of Bitcoin will be tomorrow. Is this why Bitcoin isn't widely used as a payment method yet? Because everyone believes its value will continue to rise.
Bonnie: That's true. People may be more inclined to spend those weaker currencies.
David: Do you think there will be a day in the future when not only Bitcoin but also stablecoins will be widely used for hotel payments or other blockchain-based transaction scenarios?
Simon: A blockchain is essentially just a ledger, and there are many different types of ledgers available. In Japan, people are already very accustomed to using electronic currency. You can pay at a hotel with just a tap of your phone. In the US, Apple Pay is already very popular. Transaction speed is paramount for consumers. In the early days, buying coffee with Bitcoin took 15 minutes for the transaction to be confirmed. Currently, Bitcoin is not an ideal form of currency. But it doesn't need to be a currency either, as it is an excellent store of value. In the future, Bitcoin-based applications may emerge, making micropayments a reality.
However, as a hotel company or other business, accepting Bitcoin payments is a smart option. This allows you to gradually increase your Bitcoin holdings and maintain them as a reserve asset. However, the reality is that most companies need to use revenue to cover ongoing expenses. If you're a hotel company, profits are typically very slim, which means you might not be able to retain your Bitcoin revenue for long and will have to sell it to cover operating costs. However, I believe that more and more companies will choose to accept Bitcoin as a payment method in the future. In the Middle East, many people are already using Bitcoin to buy cars and apartments. Sellers are willing to accept Bitcoin because they believe it has the potential to increase in long-term value.
Metaplanet Story
Bonnie: Michael Saylor talked about how he started investing in Bitcoin, mentioning the need for his company to compete with large companies like Microsoft during the pandemic. What is your story?
Simon: Honestly, my story isn't that complicated. We were under immense pressure. Our hotels were forced to close in three of our four markets across Southeast Asia and Japan. Revenue was completely zero, yet expenses continued. We were in an existential crisis, having to figure out how to survive. Our auditors added a "going concern warning" to our financial statements, essentially warning us that we didn't have enough cash to sustain the company for the next 12 months. It was a very difficult time.
Inspired by Michael Saylor, I shared some of his ideas at a board meeting, and the response was overwhelmingly positive. We subsequently decided to convene a shareholder meeting and propose investing in Bitcoin as a core asset class. The market's immediate and positive reaction to our announcement further solidified our commitment. We've now been implementing our Bitcoin strategy for 13 or 14 months, and I'm excited about the future and ready to embrace the high expectations and challenges ahead.
Bonnie: How did this story develop? Had you already been buying Bitcoin before this? Or did you discover it through YouTube? First, you have to believe in Bitcoin and the strategy to proceed, right? So how did your story come about?
Simon: I actually started buying Bitcoin in late 2012 or early 2013. At the time, I was living in Japan and using Mt. Gox, the platform where many early Bitcoin buyers first encountered Bitcoin. You could say I've been a long-time Bitcoin enthusiast. This interest has also helped me in my hotel business. Whenever I felt discouraged by the difficulties in the hotel business, I would turn to Bitcoin to re-energize myself. For years, I've been looking for opportunities to combine my interests with business, and the crisis during the pandemic provided me with just that opportunity.
Bitcoin is a moral responsibility
David: I remember you saying that Bitcoin is a moral responsibility. What does that mean?
Simon: I'd say it's a moral obligation. I, and others in the industry, believe it's our responsibility to help more people understand Bitcoin. In Japan, getting access to Bitcoin isn't easy. Acquiring Bitcoin through private transactions is uncommon and under-recognized. Furthermore, the account opening process is complex. Since the Mt. Gox incident, Japan has tightened its regulations on digital assets. While necessary, this has resulted in many traditional regulations remaining in place, increasing barriers to entry. Therefore, we wanted to provide Japanese investors with a simpler, tax-friendly way to purchase Bitcoin.
We have also obtained a publishing license for Bitcoin Magazine in Japan. We released our first issue in March of this year, with the next one slated for release at the end of June. Through this magazine, we hope to help Japanese people better understand Bitcoin. We believe it is our responsibility to educate people and improve their financial literacy. Therefore, Bitcoin Magazine's goal is not to generate profit, but rather to serve as a platform for spreading the story of Bitcoin.
We've also retained one hotel and renamed it the "Bitcoin Hotel." This will be an opportunity for people to experience Bitcoin in real life. They can experience the hotel's services and visit the Bitcoin Art Museum, where we plan to collaborate with Bitcoin artists from around the world to showcase their work. We'll also establish a Bitcoin Museum to explore the history and development of Bitcoin. There may even be a wax figure of Satoshi Nakamoto in the hotel lobby for people to take photos and check in. Of course, we'd be delighted if you could visit the hotel when it opens at the end of next year.
Metaplanet's Future Strategy
David: Speaking of hotels, beyond just providing accommodations and rest, Simon, what are Metaplanet's plans for the future? You've successfully turned the company around through effective strategies. Are there any new strategic developments in the works? Do you have any expansion plans? With only one hotel left, are you considering acquiring more?
Simon: No. We kept the hotel because it was a holdover asset from the past. There are a number of reasons for keeping it, not the least of which is that the operating losses associated with the hotel are tax deductible. This means that as long as we keep the hotel, we can use its tax losses against future gains from other businesses. Therefore, for us, keeping the hotel is very valuable. But beyond the hotel, we have now completely transitioned to a 100% Bitcoin-focused company.
One of the great things about Bitcoin Reserve is that you don't really need to innovate; your core business is buying Bitcoin, and the innovation lies in how you raise funds. Therefore, our primary fundraising method right now is mobile exercise warrants, which are similar to a market equity offering.
Does every company need to have Bitcoin on its books?
David: So what do you think about companies that adopt a hybrid strategy? For example, Elon Musk once bought a large amount of Bitcoin for Tesla, but they're not a company focused on Bitcoin treasury. Tesla incorporated Bitcoin into its financial system at some point, perhaps for different reasons than Metaplanet. For companies whose core business doesn't revolve around Bitcoin, do you think they should include Bitcoin in their asset allocation as a cash alternative?
Simon: Absolutely. As we've discussed before, Bitcoin makes a lot of sense as an asset. Idle cash leads to devaluation, which is something we don't want to see. I understand that some Asian companies already hold both gold and Bitcoin on their balance sheets. I believe Bitcoin is a superior version of gold, arguably "digital gold." Because of its scarcity and decentralization, Bitcoin should be a key asset in every CFO's financial planning, extending beyond cash allocation.
