While global markets are increasingly embracing cryptocurrency-based exchange-traded funds (ETFs), Japan’s regulatory bodies remain hesitant to follow suit. This cautious stance persists despite growing pressure from domestic advocacy groups and partnerships forming to launch digital asset products. Japan’s regulatory and tax policies are key barriers to the widespread adoption of cryptocurrency ETFs.
Mario Nawfal, entrepreneur and host of The Roundtable Show, summarized Japan’s position by stating the country is “still in HODL mode,” referring to its reluctance to approve crypto ETFs. Nawfal’s comments highlight the contrast between Japan’s hesitancy and the more open approaches seen in other financial hubs.
Global Crypto ETF Adoption Accelerates
Elsewhere, countries like the United States and Hong Kong have demonstrated a growing willingness to incorporate cryptocurrency into traditional finance (TradFi) by approving spot Bitcoin and Ether ETFs. For example, on October 22, investors poured $329 million into BlackRock’s iShares Bitcoin Trust, showcasing strong institutional demand for these products.
In the U.S., the Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs in January 2024, followed by Ether ETFs in July. Hong Kong authorities similarly approved both Bitcoin and Ether ETFs in April. This shift toward crypto ETFs in these markets highlights the evolving relationship between traditional financial systems and digital assets.
Japan’s Still Dragging Its Feet on Crypto ETFs – When’s the Moonshot?
Japan’s regulators are still playing it safe while the US and Hong Kong race ahead with spot crypto ETFs.
With tax hits of up to 55% on crypto gains, versus 20% for ETFs, you’d think the FSA would wake up.… pic.twitter.com/7YX3J1MBRR
— Mario Nawfal’s Roundtable (@RoundtableSpace) October 23, 2024
Japan’s Regulatory Concerns
However, Japan’s Ministry of Finance and Financial Services Agency (FSA) remain cautious about cryptocurrency-based ETFs due to concerns about market volatility and investor risk. This cautiousness contrasts with the growing appetite for crypto ETFs in other regions, where regulatory bodies are working to integrate crypto assets within existing financial frameworks.
One of the most significant obstacles to crypto ETF adoption in Japan is the country’s tax policy. Profits from general cryptocurrency investments are treated as miscellaneous income and subject to a tax rate of up to 55%. This is much higher than the 20% capital gains tax levied on traditional ETF products in Japan, leading to concerns about the disparate tax treatment and its impact on investors.
Calls for Reform in Japan
Political voices have also emerged advocating for reform in Japan’s crypto tax policy. Yuichiro Tamaki, leader of Japan’s Democratic Party for the People, proposed that voters should back his party if they believe “crypto assets should be taxed separately at 20%.” Tamaki also suggested that no tax should be imposed when exchanging one cryptocurrency for another. However, with limited seats in parliament, his party’s influence remains constrained.
Japanese Companies Remain Bullish on Bitcoin
Despite the regulatory uncertainty, Japanese firms continue to accumulate cryptocurrency. One notable example is Tokyo-listed Metaplanet, which recently purchased 108.78 BTC worth around $6.92 million on October 7. This acquisition brings the company’s total Bitcoin holdings to nearly 640 BTC, further cementing its reputation as “Asia’s MicroStrategy” for its aggressive Bitcoin accumulation strategy.
As global markets move forward with the approval of cryptocurrency-based ETFs, Japan’s hesitation reflects its concerns about investor protection and market stability. However, with domestic advocacy for change growing, Japan may soon need to reconsider its stance in order to remain competitive in the rapidly evolving world of digital finance.
