Despite the rapidly growing popularity and global acceptance of cryptocurrency-based exchange-traded funds, Japan remains cautious, with its strict tax policy impeding adoption.
Many local advocacy groups have called for approval of these funds in Japan. Some companies are also trying to form partnerships to launch digital assets products. However, the government’s rules and tax policies create obstacles.
Japanese regulators have remained hesitant to approve crypto ETFs even as other jurisdictions embrace them.
Mario Nawfal, an entrepreneur and host of “The Roundtable Show on X,” commented on Japan’s situation. He said Japan’s approach to crypto ETFs feels like it is “still in HODL” mode. This means it is holding back instead of mobbing forward.
Japan’s Still Dragging Its Feet on Crypto ETFs – When’s the Moonshot?
Japan’s regulators are still playing it safe while the US and Hong Kong race ahead with spot crypto ETFs.
With tax hits of up to 55% on crypto gains, versus 20% for ETFs, you’d think the FSA would wake up.… pic.twitter.com/7YX3J1MBRR
— Mario Nawfal’s Roundtable (@RoundtableSpace) October 23, 2024
Meanwhile, the United States and Hong Kong have approved Bitcoin and Ether spot ETFs. Investors in these jurisdictions can now invest in these cryptocurrencies through exchange-traded funds.
These approvals show that these regions are more open to including crypto in traditional finance. This change is attracting both institutions and regular investors.
On October 22, a large chunk of money flowed into these new crypto ETFs. Investors funneled $329 million into BlackRock’s iShares Bitcoin Trust, indicating a strong interest in cryptocurrency investments.
The U.S. Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs in January and Ether ETFs in July. Likewise, Hong Kong authorities approved both types of ETFs in April.
However, Japan’s Ministry of Finance and Financial Services Agency (FSA) remains cautious. They are concerned about the volatile nature of cryptocurrencies and the risks associated with related investments.
Japan’s tax policy is a critical issue that has reportedly obscured the growth of the country’s crypto landscape. Based on this policy, profits from crypto investments are classified as miscellaneous income and can be taxed at up to 55%.
In contrast, traditional ETFs have a different tax treatment. The profits from these ETFs are taxed at a lower capital gains tax rate of about 20%.
This difference in tax rates raises concerns for investors. Many believe the higher tax on crypto profits makes investing in cryptocurrencies less appealing than traditional assets.
On October 20, Yuichiro Tamaki, who leads Japan’s Democratic Party for the People, spoke about cryptocurrency taxes. Tamaki asked voters who believe cryptocurrencies should be taxed separately at 20% to support his party. He said his party would eliminate taxes on exchanges between different cryptocurrencies if voted for.
Additionally, Tamaki mentioned that the party aims to make Japan strong in Web3. It believes that this can help boost Japan’s economy and innovation in the digital space.
総合課税化は将来的な検討課題で今は考えていません。とにかく今は、日本をweb3ビジネス強国にしたいと考えています。
— 玉木雄一郎（国民民主党代表） (@tamakiyuichiro) October 20, 2024
Despite the hawkish crypto regulatory atmosphere, Japanese firms are still buying cryptocurrencies. One such firm is Metaplanet. On October 7, it bought an additional 108.78 BTC, worth about $6.92 million. After this buy, Metaplanet now holds almost 640 BTC in total.
This consistent BTC acquisition has gained Metaplanet the nickname “Asia’s Microstrategy.” According to its latest report, the firm holds 639.5BTC worth $40.5 million.