Japan’s regulators are showing reluctance in approving cryptocurrency-based exchange-traded funds (ETFs), despite the global market’s acceptance of spot crypto ETFs. This resistance from Japan’s tax and regulatory standpoint is causing obstacles for the adoption of digital asset products, despite increasing calls from domestic advocacy groups and partnerships. Mario Nawfal, the entrepreneur and host of “The Roundtable Show” on X, described Japan’s approach to crypto ETFs as being “still in HODL mode.”
The United States and Hong Kong have already given approval for spot Bitcoin (BTC) and Ether (ETF) ETFs, indicating a growing willingness to integrate crypto into traditional finance (TradFi). This shift is evident in the institutional and retail investment in new crypto ETF products. For example, investors poured $329 million into BlackRock’s iShares Bitcoin Trust on October 22.
The US Securities and Exchange Commission (SEC) greenlit spot BTC ETFs in January, followed by Ether ETFs in July. Hong Kong authorities also approved both in April. However, Japan’s Ministry of Finance and its Financial Services Agency (FSA) remain cautious due to concerns over volatility and risks associated with crypto ETF products.
Tax policy is a significant concern in Japan, as profits from general crypto investments are treated as miscellaneous income and subject to a tax rate of up to 55%. This stands in contrast to the lower capital gains tax rate of about 20% applied to traditional ETFs, creating a noticeable disparity.
Yuichiro Tamaki, the leader of Japan’s Democratic Party for the People, proposed that voters should support his party if they believe crypto assets should be taxed separately at 20%. Tamaki explained that the party aims to make Japan “a strong nation” in Web3 and suggested eliminating taxes when exchanging crypto assets with other crypto assets. However, Tamaki’s party has limited representation in Japan’s parliament.
Despite ongoing regulatory and taxation concerns, Japanese companies continue to accumulate crypto assets. Metaplanet, a Japanese investment company, recently purchased an additional 108.78 BTC worth approximately $6.92 million, bringing their total holdings to almost 640 BTC. Often referred to as “Asia’s MicroStrategy,” Metaplanet has been aggressively acquiring BTC and currently holds 639.5 BTC worth around $40.5 million.