FSA: Investors cannot sell cryptocurrency ETFs in Japan

In a public commentary on the Comprehensive Supervision Guidelines for Financial Instruments Business Operators solicited in September 2019, the FSA said:

“The proposed amendment of the Financial Services Act in 2020 for financial products targeting investment in cryptocurrency assets is expected to be formed in the future. And the Bitcoin ETF is closely related to create and sell cryptocurrency ETFs. However, Bitcoin ETFs are considered impossible to develop and sell in Japan.”

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Source: Fsa.go

Official view on cryptocurrency ETFs

According to Coinpost, the Financial Services Agency also said a virtual currency (cryptographic asset) ETFs is a specific asset. These types of assets have the same essential characteristics as a non-specific asset.

The agency has stated:

“Concerning cryptographic asset ETFs, if the ETFs themselves are investment trusts, etc., it will not be possible to originate or sell them in Japan in light of the revised Supervision Guidelines. Besides, when an investment trust or the like that invests in a cryptographic asset ETF originated overseas is created and sold, it is generally considered that the asset falls under the category of a specific asset having substantially the same characteristics as a non-specific asset.”

The agency claims investing in cryptocurrency assets is a contribution to speculation because non-specific assets have high risks.

Entrusted investment targets include domestic and foreign equity investments, as well as foreign exchange and bonds. However, when selling trust funds invested in crypto-created ETFs abroad, specific assets have the same characteristics as non-specific assets.

Non-specific assets are one of the types of fixed assets used in the balance sheet. And, non-specific assets include not only financial assets such as deposits and securities (stocks and bonds) but also land and real estate. Therefore, the characteristic equivalent to a non-specific asset here is considered to be a definition based on a security token, which is applied to the Financial Instruments and Exchange Act and digitized securities using a Blockchain.

However, if the proposed amendment is made with crypto-assets, non-specific assets will not be defined as ‘non-specific assets,’ and will not be priced like crypto-assets. At the moment, it can be defined as non-specific assets with high risk and low liquidity.

The report stated:

“This proposal is intended to invest in unspecified assets. However, this is inconsistent with the trust investment product that formally wants to invest in specific assets. can. ”

The new direction for institutional investors in the future

The report stated:

“In the future, if the records of cryptocurrency asset transactions accumulate and Blockchain technology becomes more mature, this will create a situation where the security of assets increases. become a trusted product of investment in cryptocurrency assets for institutional investors.”

At this time, eligible institutional investors are also responsible for managing public funds. Such as pension funds and regional financial institutions.

FSA acknowledges that investing in non-specific assets like cryptocurrencies is not the same as traditional financial assets like stocks and bonds. And this move is also not suitable for a tool to create stable and long-term assets for the public. And of course, this asset class does not contribute to the proper development of the national economy.

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