Japan’s regulators remain hesitant to approve cryptocurrency-based exchange-traded funds (ETFs), despite the increasing global acceptance of these financial products. While markets in the United States and Hong Kong have moved forward with spot Bitcoin and Ether ETFs, Japan’s stringent tax policies and regulatory caution continue to create barriers to wider adoption.
Global Markets Embrace Crypto ETFs
The global market has seen significant shifts in embracing crypto ETFs, with institutional and retail investors showing growing interest. In the United States, the Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs in January, followed by Ether ETFs in July. Similarly, Hong Kong authorities greenlit both Bitcoin and Ether ETFs in April.
A prime example of this shift occurred on October 22, when investors poured $329 million into BlackRock’s iShares Bitcoin Trust, reflecting the increasing incorporation of cryptocurrency into traditional finance (TradFi).
Japan’s Regulatory Hesitancy
Despite international progress, Japan’s Ministry of Finance and Financial Services Agency (FSA) remains cautious about the volatility and risks associated with cryptocurrency-based ETFs. Mario Nawfal, entrepreneur and host of “The Roundtable Show,” described Japan’s stance as “still in HODL mode,” highlighting the country’s slow pace in adopting crypto ETFs.
Taxation Concerns
Japan’s tax policy presents a significant obstacle to crypto investments. Profits from general cryptocurrency investments are taxed as miscellaneous income, with rates as high as 55%. In contrast, traditional ETFs are taxed at a lower capital gains rate of approximately 20%, creating a disparity that deters further crypto adoption.
On October 20, Yuichiro Tamaki, leader of the Democratic Party for the People, proposed reforms to reduce crypto tax rates to 20%. He also advocated for no tax on exchanging one cryptocurrency for another, positioning his party as a pro-Web3 force. However, Tamaki’s party holds relatively few seats in Japan’s parliament, limiting the potential impact of his proposals.
Japan’s Crypto Optimism Persists
Despite regulatory and tax challenges, Japanese firms continue to accumulate cryptocurrency assets. Tokyo-listed investment company Metaplanet, known as “Asia’s MicroStrategy,” purchased an additional 108.78 BTC worth around $6.92 million in early October, increasing its total Bitcoin holdings to almost 640 BTC, valued at approximately $40.5 million.
