Bitcoin ETFs in Japan: FSA Explains New Rules for Funds Investing in Cryptos

Japan’s top financial regulator, the Financial Services Agency (FSA), has explained to news.Bitcoin.com its recently adopted rules regarding the creation and sale of cryptocurrency exchange-traded funds (ETFs). Meanwhile, Japan now has a crypto index, launched by major Japanese companies.

Crypto-Focused Funds

Japan, one of the most advanced countries, publish cryptocurrencies as a means of payment in April 2017. As more and more institutions invest in cryptocurrencies, Japan’s top financial regulator has adopted new guidelines for cryptocurrency ETFs. 

A spokesperson for the FSA explained to news.Bitcoin.com this week that “In order for an instrument to be treated as an investment fund in Japan, it is necessary that it corresponds to ‘investment trusts’ as per the Act on Investment Trusts and Investment Corporations, at minimum.” As to the question of whether cryptocurrency ETFs are allowed under the new law, the regulator confirmed:"As instruments that invest mainly in crypto assets do not correspond to the legal definition of an ‘investment trust,’ such ETFs cannot be created."

The FSA proceeded to tell news.Bitcoin.com that “The Comprehensive Guidelines for Supervision of Financial Instruments Business Operators, etc., adopted on December 27, 2019, stipulate that the formulation or sales of investment funds of assets other than specified assets … is not acceptable.”

Obviously, specified assets are securities, real estate property, and other assets facilitate investments. Cryptocurrencies are not defined as specified assets.

Funds Not Primarily Investing in Crypto Assets

The agency noted that non-specified assets, which include cryptocurrencies have high price fluctuation or liquidity risks, adding: "It has been pointed out that investment trusts for which the main investment is not a cryptocurrency but are investing in cryptocurrencies are encouraging speculations." The FSA believes that we should carefully respond to the creation and sale of such instruments.

Moreover, the regulator presents how it would judge whether a fund mainly invests in crypto assets. Except core assets under management in the operation of that scheme, a comprehensive range of various factors should be considered. 

Qualified, Accredited and Institutional Investors

The regulator additionally said that qualified, institutional or accredited investors, including pension funds and regional financial institutions, are not applicable to invest in funds with crypto asset components.

The agency said it is not appropriate because the creation and sales of products may harm an investment trust / system of investment corporation’s credibility, for example when invest in unspecified assets, it is considered that there is a high probability that the investor will be made to undertake the risks of excessive price fluctuations.

Related Articles