Japan Late to OK Crypto ETFs, Keeps Strict Taxes and Regulations
While most of the world’s financial markets are embracing cryptocurrency exchange-traded funds with open arms, Japan remains cagey, holding back approval for crypto-based ETFs until much stricter conditions on regulation and taxes are met. The rigid stance of the authority is bottlenecking wider crypto investment vehicle adoption in the country, despite urging from advocacy groups for slackening the noose.
While Japan is making cautious steps, regulators in the United States and Hong Kong have already approved spot Bitcoin and Ether ETFs, reflecting a broader embrace of crypto by TradFi. Take BlackRock’s iShares Bitcoin Trust, which pulled in $329 million on Oct. 22 in what analysts described as strong market demand.
The US’s SEC approved Bitcoin ETFs back in January and Ether ETFs in July, while regulators in Hong Kong gave the nod in April. Such moves are indicative of broader acceptance of crypto assets into more mainstream financial products-a stance in dramatic contrast to the rather conservative approach seen in Japan.
Tax and Regulatory Issues in Japan
A major impediment to the crypto ETF market in Japan is its taxation policy. Considering that traditional ETFs are taxed at a capital gain rate of around 20%, profit coming from cryptocurrency investment is considered miscellaneous income, with taxes reaching as high as 55%. Such disparity would encourage further development of crypto ETFs in the Japanese market.
Yuichiro Tamaki, the leader of the Democratic Party for the People, recently urged the government to impose a 20% tax on crypto assets and allow crypto-to-crypto transactions to be exempt from levies. Given the limited political muscle of his party, no serious policy changes are expected anytime soon.
Japanese Companies Still Stockpiling Crypto
Despite the regulatory hurdles, Japanese firms remain bullish on Bitcoin. Metaplanet, an investment firm from Tokyo, added 108.78 BTC in October to its holdings of almost 640 BTC, which at present is valued at approximately $40.5 million. Metaplanet is considered quite aggressive in its accumulation strategy and thus has been compared to US-based firm MicroStrategy, famous for large Bitcoin investments.
Although crypto ETFs are in rapid growth in global markets, Japan’s cautious regulatory policy and tax policies have dragged their feet in this sector. But Japanese domestic companies keep their optimism and set up an ongoing accumulation of digital assets in light of a possibly sharp turn of crypto policies in Japan.
