The Financial Services Agency, Japan’s financial market watchdog, is exploring the idea to allow cryptocurrency-based exchange-traded funds (ETFs), according to a recent Bloomberg report.
This comes almost a month after the market watchdog shelved its plans to allow crypto-backed futures in the Japanese market. The regulator even abandoned its plans to revise the existing securities laws of the country which would have paved a path for crypto options and derivatives.
Japan is believed to be one of the most crypto-friendly nations on the globe. However, the country is still reluctant for crypto-backed future instruments even a year after the introduction of similar instruments in two US exchanges – Cboe Global Markets and CME Group.
The FSA has cited the possibility of spiking speculations in the crypto-market behind its decision of dropping the idea of crypto derivatives.
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As compared to the United States $3.7 trillion ETF market, the Japanese market is very small and is estimated to execute $335 billion worth of trades. According to Bloomberg’s source, the Japanese market watchdog is currently accessing the interest of the market players to list Bitcoin and Ethereum-backed ETFs.
In the US market, the Securities and Exchanges Commission (SEC) is still reluctant to allow Bitcoin-backed ETFs even after the constant push by multiple major players like the Winklevoss brothers. The SEC has rejected the applications based on consumer protection concerns.
Amid the massive breach at Coincheck in early 2018 which resulted in the theft of $534 million worth NEM tokens, the FSA has tightened its noose on the country’s crypto exchanges. The exchanges in the country even formed a consortium – Japan Virtual Currency Exchange Association (JVCA) – to self-regulate themselves to take precautionary measures against any cyber attack. The JVCA had proposed a cap on the leverage offered by cryptocurrency exchanges to mitigate the threats.
The FSA, recently, issued a report published by a study group which recommended many measured to be taken by the crypto sector to overcome most of the security-related concerns. In 2018, the FSA also proposed a set of guidelines to regulate the initial coin offerings (ICO).