Japan Plans to Update Cryptocurrency Rules and Allow Bitcoin ETFs

Japan’s financial regulators are considering reviewing and updating their existing rules for the cryptocurrency sector to make them less stringent, according to recent reports. Bloomberg reported on Monday, citing an anonymous Financial Services Agency (FSA) official, that Japan is contemplating changes to its cryptocurrency regulations.

The reform of Japanese regulations is expected to take place in the coming months and will involve an evaluation of whether the current system for regulating cryptocurrencies under the payments law is effective. The goal is to determine if existing rules are sufficient to protect consumers. Regulators will assess whether changes are needed to better address the way digital currencies are being used.

The FSA official emphasized that digital currencies are mainly used as investment instruments rather than payment instruments. This distinction may prompt rule changes or even reclassification of digital assets as financial instruments, which would then be covered under Japan’s investment law.

Such a change could lead to a reduction in taxes on cryptocurrencies and pave the way for domestic exchange-traded funds (ETFs) to invest in digital assets like Bitcoin. Lifting the current ban on launching ETFs that include tokens would also be a «natural» next step, according to the FSA official.

Japan has historically imposed strict regulations on the digital currency sector, partly in response to the 2014 bankruptcy of Mt. Gox, which was once the world’s largest Bitcoin exchange. However, the country is now exploring more favorable regulations, as nations worldwide seek greater transparency and oversight in the cryptocurrency industry.

In recent years, Japan’s traditional financial institutions have shown increased interest in cryptocurrencies, with major players like Sony Group and Mitsubishi UFJ Financial Group making efforts in this space.

In July, mutual fund manager Franklin Templeton announced a strategic alliance with Japan’s SBI Holdings to bring the first spot ETF based on Bitcoin and Ethereum to the Japanese market.