The Financial Services Agency (FSA) of Japan is moving to approve spot cryptocurrency exchange-traded funds (ETFs) by 2028, a landmark regulatory shift for Asia's second-largest economy. According to a report by Nikkei Asia, the FSA plans to amend the Investment Trust Act's enforcement order to add cryptocurrencies to the list of eligible "specified assets" for investment trusts.
If approved, funds holding digital assets like Bitcoin (BTC) and Ether (ETH) directly could list on the Tokyo Stock Exchange (TSE). This would provide investors with regulated access to crypto through traditional brokerage accounts, eliminating the need for direct wallet and private key management.
Major Japanese financial groups are already positioning themselves. Nomura Asset Management and SBI Global Asset Management are among the firms preparing to develop products ahead of the regulatory changes. Industry estimates suggest Japan's crypto ETF market could reach ¥1 trillion ($6.7 billion) in assets under management (AUM), drawing comparisons to the U.S. market where spot Bitcoin ETFs now hold roughly $120 billion.
Perhaps the most significant accompanying reform is a proposed tax cut. The FSA plans to submit legislation to the Diet in 2026 that would reclassify cryptocurrencies under the Financial Instruments and Exchange Act. This would slash the maximum tax rate on crypto gains from 55% to a flat 20%, aligning it with taxes on stocks and investment trusts. This move is expected to unlock significant pent-up demand from Japanese investors, over 60% of whom have expressed interest in crypto exposure.
The regulatory overhaul includes a strong investor protection framework. Trust banks handling ETF custody will be required to implement strict security protocols, a response heightened by the 2024 DMM Bitcoin hack. Asset managers must also enhance risk disclosures and operational safeguards ahead of the 2028 launch.
Japan's move comes amid intensifying competition in Asia's fragmented crypto ETF landscape. Hong Kong remains the only market with retail-accessible spot crypto ETFs (including Bitcoin, Ether, and Solana products), while South Korea is pushing its own Digital Asset Basic Act with a potential Bitcoin ETF. Taiwan has expanded access to overseas crypto ETFs, and Singapore has not approved retail crypto ETFs. Japan's 2028 timeline allows it to learn from other markets while positioning itself as a potentially significant, albeit late, entrant.
