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This hesitant approach comes as a surprise, given Japan’s self appraisal as a digital asset-friendly country.
Key Notes
Japan's strict tax laws and regulatory hurdles limit crypto ETF adoption despite global trends.Crypto scandals in Japan have led to a cautious approach by regulators and traditional financial institutions.Japan has been extremely cautious about fully embracing crypto-backed exchange-traded funds (ETFs). That is despite the fact that countries like the US, Hong Kong, and other markets are moving ahead with innovations in that direction.
This hesitant approach comes as a surprise, given Japan’s self appraisal as a digital asset-friendly country. The country has openly shared its ambitions to become a global crypto hub. However, its regulators remain conservative, particularly with the tax policies and regulations that could open the doors for widespread adoption.
Japan Reluctant to Embrace Global Crypto ETFs Growth
The approval of the first spot Bitcoin ETFs in the US earlier this year, brought about similar moves across the world. With the products providing a more secure way for investors to gain exposure to digital assets, one would think that Japan would, by now, have joined the investment trend.
As it turns out, Japan’s financial authorities, particularly the Financial Services Agency (FSA), remain cautious about hopping on the moving train.
Oki Shiozawa, an investment director at Sumitomo Mitsui Trust Asset Management, hints at what exactly is going wrong. According to a Financial Times report, Shiozawa believes that Japanese regulators are generally apprehensive of crypto or anything that bears semblance with it. So, at the moment, it seems that the authorities can not be persuaded to see the light, he suggested.
Despite this reluctance, digital asset advocacy groups in Japan are calling for change. More so, with regard to the tax benefits that crypto ETFs could bring.
Currently, profits from general crypto investments in Japan are taxed at a maximum rate of up to 55%. That is because they are categorized as miscellaneous income.
In contrast, though, ETFs are subject to capital gains tax. This means that they would have a significantly lower rate of around 20%.
Regulatory Hurdles and Scandals Weigh Heavily
Keisuke Kimura, vice president of the Japan Cryptoasset Business Association, stressed that existing laws in Japan do not allow for crypto assets to be included in ETFs or other investment trusts. He noted that if any such regulatory changes are to occur, then there must first be broader societal acceptance of cryptocurrencies as a viable investment option.
Meanwhile, for crypto to gain ground and be widely accepted in Japan, the country must first get past the trauma of the large-scale crypto scandals that once rocked it.
For instance, since the infamous Mt. Gox hack, which led to the loss of hundreds of millions of dollars in Bitcoin, regulators have been exercising serious caution in dealing with digital assets in general.
Despite the situation, it might be interesting to note that some of Japan’s major financial players are positive about ETFs becoming a reality in the near future. This explains why, in July, Franklin Templeton and Japanese financial giant SBI Holdings announced a partnership that would see them develop new digital asset products, including crypto ETFs. Though this partnership, and many others like Nomura’s new digital asset subsidiary hint at a possible shift in the market, for now, Japan’s FSA has yet to indicate that any regulatory changes are in the works.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
Mayowa is a crypto enthusiast/writer whose conversational character is quite evident in his style of writing. He strongly believes in the potential of digital assets and takes every opportunity to reiterate this. He's a reader, a researcher, an astute speaker, and also a budding entrepreneur. Away from crypto however, Mayowa's fancied distractions include soccer or discussing world politics.
