Japan won’t be getting Bitcoin ETFs anytime soon: here’s why

Japanese crypto investors will have to wait to get their hands on cryptocurrency-based exchange-traded funds, as regulators are showing hesitancy.

This reluctance persists even as other markets embrace similar products.

Regulators in Japan are not ready to approve cryptocurrency-based ETFs, according to Oki Shiozawa, an investment director at Sumitomo Mitsui Trust Asset Management. 

In an interview with the Financial Times, Shiozawa explained that the Financial Services Agency (FSA) remains “conservative” about such products.

He suggested that convincing authorities to approve crypto ETFs would be difficult under the current circumstances, although he didn’t rule out the possibility entirely.

Keisuke Kimura, vice president of the Japan Crypto Asset Business Association, added that regulatory constraints are a major barrier to broader crypto adoption in Japan. 

He linked these constraints to the country’s past scandals, such as the Mt. Gox collapse and the DMM hack, which have caused significant losses for investors.

Kimura added that Japan’s laws do not currently allow for crypto assets to be included in investment trusts like ETFs due to these concerns.

Japan, despite its crypto-friendly image, continues to impose high taxes on digital assets, which acts as a major deterrent.

The nation currently taxes profits from crypto investments under “miscellaneous income” at rates as high as 55%.

This contrasts with traditional investments like ETFs, which are taxed at a much lower capital gains rate of 20%.

Recently, Yuichiro Tamaki, the leader of Japan’s Democratic Party for the People, proposed reducing the tax rate on crypto profits to 20% if he is elected, to align it with taxes on traditional investments.

In the meantime, both the United States and Hong Kong have approved spot Bitcoin and Ether ETFs, which have already drawn significant investor interest. 

The U.S. Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs in January and Ether ETFs in July.

Hong Kong followed suit in April.

To date, over $21.15 billion has flown into the 12-spot Bitcoin ETF offerings in the US.

Japan remains pro-crypto

Nevertheless, despite the cautious stance, Japanese regulators have shown interest in improving the regulatory environment for crypto. 

As previously reported by Invezz, the FSA has shown its willingness to reassess its current framework for digital assets, which are currently regulated under the Payments Act. 

Experts believe it could potentially lower the tax rate on crypto investments to 20%, which would align it with the tax rate for traditional assets.

Japan’s newly elected Prime Minister, Shigeru Ishiba, is also reportedly open to exploring blockchain technology and Web3 innovations, which could be beneficial for further development in the sector.

Meanwhile, Japanese firms have continued to invest in crypto. For instance, Metaplanet has been aggressively accumulating Bitcoin.

On Oct. 7, the company purchased 108.78 BTC, worth approximately $6.92 million, bringing its total Bitcoin holdings to nearly 640 BTC. 

In June, a survey by Nomura and Laser Digital showed that over 500 investment managers in Japan were considering investing in crypto assets, further reflecting the nation’s growing appetite for the emerging asset class. 

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