The Japanese Financial services Agency (FSA) is currently assessing interest in cryptocurrency exchange-traded funds, according to a January 6 report from Bloomberg. The report cites information obtained from a “person familiar with the matter” and comes on the heels of regulators’ rejection of cryptocurrency futures and options.
Apparently, the FSA determined that those futures and options would just fuel more speculation the markets. Bloomberg called the decision to deny approval for those derivatives a “setback for investors” who have been hoping for increased institutional investment to help shore up the cryptocurrency market but noted that ETF approval could provide a surge in interest from retail investors.
The FSA spent months last year investigating its failure to prevent the heist at Coincheck, and has taken a number of steps to increase oversight of the industry and provide more assurances for consumers:
In addition to dropping support for crypto derivatives, the agency has also decided to give more oversight power to self-regulatory bodies, put most initial coin offerings under the scope of its securities law and cap leverage that can be offered by crypto brokers, the FSA announced late last month.
The country’s Liberal Democratic Party is expected to submit a bill during the current legislative session. Bloomberg’s source suggested that the proposed legislation will likely seek to codify many of the FSA’s previously announced regulatory decisions, amend the country’s Financial Instruments and Exchange Act, and make changes to the Payment Services Act.
While there is reason to be hopeful that an ETF could generate some new institutional interest for cryptos in Japan, the report soberly notes that “even ETFs for more traditional asset classes such as stocks and bonds haven’t caught on with Japanese retail investors who continue to prefer mutual funds. Japan’s ETF market is worth $335 billion (with about 75 percent owned by the central bank). That’s a fraction of the $3.7 trillion worth of ETFs outstanding in the U.S.”