Japan is steadily preparing to introduce cryptocurrency asset index exchange-traded funds (ETFs) by 2028, aligning with securities legislation and tax regulations. This could significantly facilitate access to crypto assets for both individual and institutional investors via their existing securities accounts, pending necessary approvals from regulatory authorities. Currently, Japanese investors face complex processes, such as opening exchange accounts and managing digital wallets, to access cryptocurrencies.
Growing Interest in Crypto ETFs
Following the launch of Bitcoin ETFs in the United States at the start of 2024, there is increasing anticipation for similar steps to be taken in Japan. The U.S. market manages approximately $130 billion worth of assets, attracting interest from both pension funds and universities. According to Motoyuki Azuma, Director of Convano Consulting, Japanese investors often approach crypto assets in portfolios 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 noted.
A survey conducted by Laser Digital Holdings in 2024 showed that 54% of institutional investors in Japan plan to invest in crypto assets within the next three years. However, Azuma indicated that short-term investment strategies have become challenging in the current market conditions.
“Strategies based on Bitcoin’s Net Asset Value are becoming harder, but long-term alternative asset planning with crypto ETFs will be easier,” he reported.
Regulatory Hurdles and Security Criteria
For crypto ETFs to be introduced in Japan, approval from the Tokyo Stock Exchange and amendments to the Investment Fund Act are essential. This amendment would categorize crypto assets as “specified assets.” Due to recent security breaches, regulators are focusing more on custody and customer protection standards.
In 2024, a security breach at a local crypto platform resulted in a loss of $306 million worth of Bitcoin, triggering stricter regulatory measures. Authorities aim to recognize crypto assets as financial instruments with the planned 2026 legislation.
Taxation and Financial Institutions’ Role
Currently, crypto income in Japan falls under “miscellaneous income” and is taxed up to 55%. The government plans a 2026 tax reform to introduce a flat 20% tax for specific crypto assets, similar to stocks. This change could increase interest in crypto investments among both individual and institutional investors.
Major financial institutions in Japan are closely monitoring developments in the crypto ETF space. Nomura Asset Management, SBI Global Asset Management, Daiwa Asset Management, and entities under the Mitsubishi UFJ Group are working on developing potential products. SBI Holdings is reportedly planning to launch an ETF product that tracks Bitcoin and XRP.
SBI VC Trade President Tomohiko Kondo noted in January that crypto assets have evolved beyond mere trading transactions, offering investors various opportunities through fund revenues and diverse strategies.
Nomura Holdings Senior General Manager Hajime Ikeda stressed that launching crypto ETFs directly after legislative changes may not be feasible. He warned that without clarity on practical matters such as customer information protocols and security, rushing the products could pose risks.
