Japan is on track to launch cryptocurrency exchange-traded funds (ETFs) by 2028, following a comprehensive overhaul of its securities legislation and tax regulations. This initiative aims to simplify access to digital assets for both individual and institutional investors by allowing them to utilize existing securities accounts, contingent on regulatory approvals.
Currently, accessing cryptocurrencies in Japan requires navigating a convoluted process, including setting up exchange accounts and managing digital wallets. The anticipated launch of cryptocurrency ETFs comes amidst a growing interest in such investment vehicles, particularly after the successful introduction of Bitcoin ETFs in the United States earlier in 2024.
The U.S. market, managing approximately $130 billion in assets, has drawn significant interest from institutional players, including pension funds and academic institutions. In Japan, however, investor sentiment towards crypto assets has been more cautious. Motoyuki Azuma, Director of Convano Consulting, noted that many Japanese investors approach cryptocurrency portfolios with skepticism. A recent survey by Laser Digital Holdings found that 54% of institutional investors in Japan are looking to invest in crypto assets within the next three years, although short-term strategies have become increasingly difficult in the current market environment.
Regulatory Landscape and Security Standards
For Japan to introduce crypto ETFs, it requires the approval of the Tokyo Stock Exchange and modifications to the Investment Fund Act, which would classify cryptocurrencies as “specified assets.” Recent security incidents, including a major breach at a local crypto platform in 2024 that resulted in losses exceeding $306 million in Bitcoin, have prompted regulators to enhance their focus on custody and customer protection standards.
Authorities are working towards recognizing crypto assets as financial instruments with proposed legislation set for 2026. Currently, income derived from cryptocurrencies is taxed as “miscellaneous income” at rates up to 55%. Upcoming tax reforms in 2026 aim to simplify this to a flat 20% for certain crypto assets, aligning them more closely with stock taxation, which could spur interest among investors.
Market Reactions and Institutional Interest
Major financial institutions in Japan are keeping a close eye on the developments in the crypto ETF landscape. Companies such as Nomura Asset Management, SBI Global Asset Management, Daiwa Asset Management, and entities within the Mitsubishi UFJ Group are actively exploring the creation of potential ETF products. Notably, SBI Holdings is reportedly working on an ETF that would track Bitcoin and XRP.
According to Tomohiko Kondo, President of SBI VC Trade, the landscape for crypto assets has evolved significantly, providing investors with opportunities beyond simple trading. However, Hajime Ikeda, Senior General Manager at Nomura Holdings, cautioned that launching crypto ETFs immediately following legislative changes might not be practical. He emphasized the need for clarity on essential operational matters, such as customer information protocols and security measures, to avoid potential risks in the market.
