Japan is steadily moving toward introducing cryptocurrency asset index exchange-traded funds (ETFs) by 2028, aligning with securities legislation and tax regulations. This could allow both retail and institutional investors to access crypto assets through their existing securities accounts, pending necessary regulatory approvals. Currently, Japanese investors face complex procedures such as opening exchange accounts and managing digital wallets to buy cryptocurrencies.
US ETF Success Spurs Japanese Interest
Following the launch of Bitcoin ETFs in the United States in early 2024, anticipation for similar products in Japan has grown. The US market now manages about $130 billion in assets, drawing interest from pension funds and university endowments. Motoyuki Azuma, Director of Convano Consulting, noted that Japanese investors often approach crypto with skepticism. “Many Japanese investors question the reliability of holding Bitcoin in our portfolio. However, ETFs add formality and trust to crypto investments, making explanations easier,” he said. A 2024 survey by Laser Digital Holdings showed that 54% of institutional investors in Japan plan to invest in crypto assets within three years. Azuma indicated that short-term strategies have become challenging, but long-term alternative asset planning via crypto ETFs will be easier.
Regulatory Hurdles and Custody Standards
For crypto ETFs to launch in Japan, the Tokyo Stock Exchange must approve them, and the Investment Fund Act needs amendments to classify crypto assets as “specified assets.” Recent security breaches have pushed regulators to focus on custody and customer protection. In 2024, a breach at a local crypto platform caused a loss of $306 million in Bitcoin, triggering stricter measures. Authorities aim to recognize crypto assets as financial instruments through planned 2026 legislation.
Tax Reform and Financial Institutions' Role
Currently, crypto income in Japan is taxed as “miscellaneous income” at rates up to 55%. The government plans a 2026 tax reform to apply a flat 20% tax on specific crypto assets, similar to stocks. This shift could boost interest among both individuals and institutions. Major financial institutions are closely watching the space. Nomura Asset Management, SBI Global Asset Management, Daiwa Asset Management, and Mitsubishi UFJ Group entities are developing potential products. SBI Holdings reportedly plans to launch an ETF tracking Bitcoin and XRP. SBI VC Trade President Tomohiko Kondo noted that crypto assets have evolved beyond trading, offering opportunities through fund revenues and diverse strategies. However, Nomura Holdings Senior General Manager Hajime Ikeda warned that rushing crypto ETFs immediately after legislative changes could pose risks without clarity on customer information protocols and security.