Japan’s regulatory authorities continue to exercise caution regarding spot cryptocurrency exchange-traded funds (ETFs), diverging from the more progressive approaches observed in markets like the U.S. and Hong Kong, according to Oki Shiozawa, investment director at Sumitomo Mitsui Trust Asset Management.
In an interview with the Financial Times, Shiozawa, whose firm manages over $620 billion in assets, expressed skepticism about the current prospects for approval of crypto ETFs in Japan. “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,” he stated.
While Japan has branded itself as a crypto-friendly nation aiming to become an asset management hub, high tax rates and stringent regulatory constraints hinder broader adoption. Profits from cryptocurrency investments in Japan are classified as miscellaneous income and taxed at rates as high as 55%, compared to a 20% capital gains tax for ETFs.
Keisuke Kimura, vice president of the Japan Cryptoasset Business Association, highlighted that regulatory barriers and public wariness—stemming from past scandals like Mt. Gox and DMM, which resulted in substantial investor losses—are key factors behind the current situation. “The limitations in the country are mainly due to regulatory constraints, as our laws don’t currently permit the inclusion of crypto assets in investment trusts, including ETFs,” Kimura explained.
Despite these hurdles, some firms are proactively preparing for potential regulatory changes. In July, Franklin Templeton and SBI Holdings announced a partnership to develop new products, including crypto ETFs. Additionally, Japanese banking giant Nomura has introduced a Bitcoin adoption fund aimed at institutional investors.
The U.S. approved its first spot Bitcoin ETFs in January, followed by Ethereum ETFs in July. Meanwhile, markets across the Asia-Pacific region, including Hong Kong and Australia, have made similar strides, prompting calls for Japan to adopt a comparable regulatory approach.
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