According to Bloomberg, Japanese financial institutions such as Mitsubishi UFJ Trust and Banking and Nomura Securities have organized a proposal suggesting that if they consider launching a cryptocurrency ETF, it should focus on major tokens such as Bitcoin and Ethereum. Japanese investors hope that the approval of a cryptocurrency ETF will bring significant tax benefits.
(Prior summary: Why is the approval of a Bitcoin ETF considered a major victory in the market?)
(Supplemental background: After Hong Kong approved a cryptocurrency ETF, will South Korea, Japan, and Singapore follow suit? What about Taiwan?)
Table of Contents:
Priority support for Bitcoin and Ethereum ETFs
Japan takes a cautious stance on cryptocurrency ETFs
Reforms drive the approval of cryptocurrency ETFs
In January and July of this year, the United States successively launched Bitcoin and Ethereum spot ETFs, sparking discussions in various countries on whether domestic investors should be allowed to participate in such products, or even directly launch their own cryptocurrency ETFs. Even the more conservative Japan is considering whether to follow the footsteps of overseas countries and issue a cryptocurrency ETF.
According to Bloomberg’s report on the 25th, Japanese institutions interested in issuing a cryptocurrency ETF have formed an organization and proposed in the latest proposal that if they consider launching a cryptocurrency ETF, it should focus on major tokens such as Bitcoin and Ethereum. The organization believes:
The members of this organization include major trust banks, cryptocurrency exchanges, and securities brokerage firms in Japan. Trust banks include “Mitsubishi UFJ Trust and Banking” and “Sumitomo Mitsui Trust Bank,” cryptocurrency exchange members include “bitFlyer,” and securities brokerage firm members 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 individual positions of each member.
In addition, the proposal also requests that Japanese authorities re-examine the current cryptocurrency tax system. This is the main reason why Japanese investors are eager for the approval of a cryptocurrency ETF. In Japan, profits from general cryptocurrency investments are considered miscellaneous income and are subject to a maximum tax rate of 55%. However, ETFs that can be traded on the securities market are considered capital gains, with a tax rate of approximately 20%.
Compared to countries such as the United States, Hong Kong, and Australia that have successively approved cryptocurrency ETFs this year, Japan appears to be more cautious and conservative in promoting such products. According to the Financial Times, despite Japan claiming to be a digital asset-friendly country, it is still unwilling to easily relax tax and regulatory restrictions in its policies to avoid risks.
Regarding this, Oki Shiozawa, the investment director of Sumitomo Mitsui Trust Bank, expressed that the Japanese Ministry of Finance generally holds a skeptical attitude towards cryptocurrencies. He admitted that he couldn’t think of any way to successfully convince the authorities, but he also added:
Keisuke Kimura, Vice Chairman of the Japan Cryptocurrency Business Association, believes that in order to launch a cryptocurrency ETF, Japanese regulatory agencies need to make various reforms, including relaxing regulatory restrictions. He stated that the key to promoting these changes lies in the widespread acceptance of cryptocurrencies in society and the belief that they can bring positive benefits to the wealth of Japanese citizens.
However, past cryptocurrency scandals, such as the Mt. Gox and DMM hacks that resulted in the loss of hundreds of millions of dollars’ worth of Bitcoin, have made it more complicated to push for such reforms. Kimura pointed out:
In conclusion, Japan may still need some time to relax regulatory restrictions and reduce high tax rates before a cryptocurrency ETF is approved.