In January and July this year, the US launched Bit and ETH spot ETFs, sparking discussions in various countries on whether to allow domestic investors to participate in such products, and even directly launch their own crypto ETFs. Even the more conservative Japan is considering whether to follow the overseas trend and issue crypto ETFs.
Prioritize support for Bit and ETH ETFs
According to a report by Bloomberg yesterday (25th), an organization of Japanese institutions interested in issuing crypto ETFs has been formed, and in their latest proposal, they suggest that if crypto ETFs are to be considered, the focus should be on major tokens such as Bit and ETH. The organization believes:
The high market capitalization and stable track record of these tokens make them suitable for investors as medium to long-term asset allocations.
The organization's members include major Japanese trust banks, crypto exchanges, and securities brokerages. The trust banks include "Mitsubishi UFJ Trust Bank" and "Sumitomo Mitsui Trust Bank", the crypto exchange member is "bitFlyer", and the securities brokerages include "Nomura Securities" and "SBI Securities". The organization specifically emphasizes that the opinions in the proposal represent a consensus among the members and do not represent the positions of individual members.
In addition, the proposal also calls for the Japanese authorities to re-examine the current crypto tax system. This is the main reason why Japanese investors are hoping for the approval of crypto ETFs. In general, profits from crypto investments in Japan are considered miscellaneous income and are subject to a maximum tax rate of 55%, while ETFs traded on the securities market are considered capital gains and are taxed at around 20%.
Japan takes a cautious stance on crypto ETFs
Compared to countries like the US, Hong Kong, and Australia, which have approved crypto ETFs this year, Japan appears to be more cautious and conservative in promoting such products. According to a report by the Financial Times, although Japan prides itself as a digital asset-friendly country, it is still unwilling to easily relax tax and regulatory restrictions in order to avoid risks.
In this regard, Oki Shiozawa, Chief Investment Officer of Sumitomo Mitsui Trust Bank, stated that the Japanese Ministry of Finance generally holds a skeptical attitude towards crypto, and he frankly admitted that he could not think of any way to successfully convince the authorities, but he also added:
I'm not saying that ETFs related to crypto are impossible, it's just that the Japanese Financial Services Agency (FSA), which is responsible for approving financial products, is basically conservative.
Reforms drive the approval of crypto ETFs
Keisuke Kimura, Vice Chairman of the Japan Crypto Asset Business Association, believes that for the launch of crypto ETFs to be realized, the Japanese regulatory authorities need to make reforms in various aspects, including relaxing regulatory restrictions. He stated that the key to driving these changes is the widespread social recognition of crypto assets, and the belief that they can bring positive benefits to the wealth growth of Japanese citizens.
However, past crypto scandals such as the hacks of Mt.Gox and DMM, which resulted in the loss of hundreds of millions of dollars in Bit, have made these reforms more complex. Kimura pointed out:
"While some venture capital firms may be ready to move forward, many traditional large asset management companies, insurance companies, and financial institutions still need time to understand crypto assets and risk management protocols."
In summary, before crypto ETFs can be approved, Japan may still need some time to relax regulatory restrictions and lower high tax rates.
