Japan remains cautious on approving cryptocurrency ETFs

Odaily News The approval of spot cryptocurrency ETFs in the U.S., Hong Kong, and other markets has highlighted the conservative and even contrasting attitudes of Japanese regulators in this area. Japan has long positioned itself as a digital asset-friendly country as part of its broader goal to become a larger asset management center. But at the policy level, Japan is unwilling to take the risk of removing the tax and regulatory restrictions required for widespread adoption. Oki Shiozawa, investment director of Sumitomo Mitsui Trust Asset Management, said that it is well known that the Japanese Ministry of Finance is skeptical of cryptocurrencies in general. "At present, I can't think of any way to successfully convince these authorities," he said. Shiozawa added: "I am not saying that cryptocurrency-related ETFs are impossible, but the Japanese Financial Services Agency, which is responsible for approving financial products, is basically conservative." After the launch of Bitcoin and Ethereum ETFs in the United States and Hong Kong, Japanese digital asset advocacy groups called on authorities to approve the launch of such ETFs, with the core argument that cryptocurrency ETFs would bring significant tax advantages. In Japan, profits from general cryptocurrency investments are considered miscellaneous income and are therefore taxed at a maximum rate of 55%. On the other hand, ETFs that can be traded on securities markets are considered capital gains. This makes ETFs taxed at a lower rate of about 20%, providing a more attractive option for investors who want to diversify their portfolios with digital assets. Spot cryptocurrency ETFs will also offer tax benefits such as loss carryforwards. But Keisuke Kimura, vice president of the Japan Crypto Asset Business Association and former financial advisor at Sumitomo Mitsui Nikko Securities, said a lot needs to change before regulators can take action to introduce these potential benefits. Kimura said: "The current situation in Japan is mainly due to regulatory restrictions, as our laws currently do not allow crypto assets to be included in investment trusts, including ETFs. To change this situation, society needs to more widely accept that crypto assets can make a positive contribution to the asset formation of Japanese citizens." (FT)