Digital Asset Treasuries Embrace In-Kind Contributions as Capital Dries Up
Corporate executives are increasingly turning to an innovative funding structure called in-kind contributions to fuel digital asset treasury (DAT) vehicles as traditional investor appetite weakens. This approach now represents a growing portion of DAT deals, marking a significant shift in how crypto accumulation vehicles are being capitalized.
Instead of raising cash to purchase tokens through open markets, DAT sponsors are contributing large portions of their own cryptocurrency holdings—often unlisted and difficult to value accurately. This fundamental change in funding methodology is raising concerns about transparency and risk distribution, particularly for retail investors.
How In-Kind Contributions Work and Why They're Risky
Digital-asset treasuries represent a new category of public companies specifically designed to hold concentrated cryptocurrency positions. The structure gained significant traction in 2025 as small-cap firms, particularly from biotech and mining sectors, reinvented themselves as digital-asset proxies.
The critical distinction lies in risk assessment. Earlier DAT deals raised money to purchase tokens through regular markets, providing at least some independent price verification. In-kind contributions bypass this crucial step, allowing insiders to determine their tokens' valuation, sometimes before the tokens even begin public trading.
This shift means that pricing and trading risks land more directly on shareholders, many of whom are individual retail investors. The situation has become increasingly concerning as Bitcoin's recent plunge well below $100,000 has shaken investor confidence further.
Real-World Examples Highlight the Growing Trend
The in-kind structure was prominently displayed in a recent $545 million private placement by Tharimmune Inc., a biotech firm that transformed into a crypto proxy. Approximately 80% of this raise came in the form of unlisted Canton tokens, priced at 20 cents each according to an investor presentation reviewed by Bloomberg News.
The reality check came when the token began trading on exchanges November 10 and quickly fell to around 11 cents, representing nearly a 50% decline from the valuation set by insiders. Tharimmune did not respond to requests for comment regarding this significant price discrepancy.
Other companies are following similar templates. Alt5 Sigma Corp. raised $1.5 billion in August to invest in tokens issued by World Liberty Financial, a crypto venture connected to US President Donald Trump. Half of this amount came as WLFI tokens priced at 20 cents each, despite the tokens not trading on exchanges at that time.
Similarly, Flora Growth Corp., a Nasdaq-listed company, announced a $401 million deal in September to acquire Zero Gravity tokens. Upon closer examination, the firm had raised only $35 million in cash, paired with a $366 million in-kind contribution of then-unlisted 0G tokens. These tokens were initially priced at approximately $3 each but now trade at about $1.20.
Expert Warnings and Market Consequences
Industry experts are sounding alarms about the potential dangers of this trend. Chris Holland, partner at Singaporean consulting firm HM, emphasized that "if market sentiment shifts, public investors in the fund, particularly retail, may be left exposed if the underlying illiquidity is finally tested, leaving them to absorb the very losses the sponsor's contribution structure was designed to sidestep."
Akshat Vaidya, co-founder and managing partner of Arthur Hayes' family office Maelstrom, provided a stark assessment: "An 80% in-kind DAT is effectively a thin equity wrapper around one single volatile token. If the token drops 50%, the share price falls 80%-100% because the premium evaporates at the same time that forced sellers hit the bid."
The data supports these concerns. Singapore-based 10X Research reported in October that retail traders had lost an estimated $17 billion buying stocks modeled on Michael Saylor's archetypal Bitcoin buyer Strategy Inc.
Both Flora Growth Corp. and similar companies have seen their shares decline more than 65% since announcing plans to adopt DAT strategies, demonstrating the substantial risks involved in these arrangements.
Flora Growth CEO Daniel Reis-Faria maintains confidence in DATs' potential "to give investors new on-ramps into crypto," stating he has "a long-term conviction-driven approach and belief in both 0G and decentralized AI infrastructure."
As the crypto market continues to evolve, the debate around in-kind contributions highlights the ongoing tension between innovation and investor protection in the rapidly changing digital asset landscape.
