Japan’s regulators are adopting a conservative approach toward spot cryptocurrency exchange-traded funds (ETFs), in contrast to the more open policies seen in the U.S. and Hong Kong, according to Oki Shiozawa, investment director at Sumitomo Mitsui Trust Asset Management.
Shiozawa, speaking with the Financial Times in a recent interview, stated that the country’s top financial regulator, the Financial Services Agency (FSA), is currently not positioned to approve crypto ETFs.
“I can’t think of any way to successfully persuade those authorities at the moment. I am not saying that crypto-related ETFs are impossible. However, Japan’s Financial Services Agency, which approves financial products, is basically conservative,” Shiozawa stated.
Meanwhile, Keisuke Kimura, the vice-president of the Japan Cryptoasset Business Association, explained that the cautious approach is due to “regulatory limitations” and the public’s wary perception of cryptocurrencies, largely shaped by past scandals like Mt. Gox and DMM. These incidents led to significant investor losses, and the aftermath continues to influence public sentiment toward digital assets.
Kimura highlighted that Japan’s laws currently do not permit the inclusion of crypto assets in investment trusts, including ETFs, creating a regulatory barrier.
These comments come as a campaign for reform for crypto rules in the nation is taking steam. Yuichiro Tamaki, leader of the Democratic Party for the People (DPP), has been a vocal proponent of crypto-friendly policies. He recently promised to implement tax reforms that include a 20% tax rate on digital assets and replace the current classification of cryptocurrencies as miscellaneous income if elected. Tamaki has also called for the elimination of taxes on crypto-to-crypto transactions to promote a Web3 and NFT-focused token economy.
Amid these calls for reform, the FSA is reportedly set to review the effectiveness of the current regulatory framework, with a focus on investor protection. This evaluation could lead to amendments to the act or a reclassification of cryptocurrencies as financial instruments under Japan’s investment laws, potentially enabling domestic funds to invest in digital assets in the future.
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