Japan 2028 to legalize cryptocurrency ETFs! Nomura and SBI rush into the $6.4 billion market

Nikkei reports that Japan’s Financial Services Agency (FSA) plans to lift the cryptocurrency ETF ban by 2028. Authorities will amend the Investment Trust Law to classify virtual currencies as “specified assets” eligible for investment. Major institutions like Nomura and SBI have already promoted product development, with at least 6 asset management firms researching related products. The prerequisite for lifting the ban is tax reform, reducing the top rate from 55% to 20%. Market expectations estimate the scale at 1 trillion yen (64 billion USD).

Japan’s 2028 Path to Lifting Cryptocurrency ETF Ban: Legal Reforms and Tax Changes in Tandem

Japan’s FSA is reportedly exploring the possibility of lifting the ban on spot cryptocurrency ETFs (such as Bitcoin ETFs) as early as 2028. The plan includes modifying the implementation details of the Investment Trust Law to include virtual currencies within the scope of “specified assets” that investment trusts can hold. This legal change is a critical prerequisite for Japan to open up to cryptocurrency ETFs, as current laws prohibit investment trusts from directly holding virtual currencies, making ETF issuance legally infeasible.

The Investment Trust Law is Japan’s core legislation regulating collective investment schemes, with detailed provisions on asset classes such as stocks, bonds, real estate, and commodities. Classifying virtual currencies as “specified assets” would grant cryptocurrencies the same legal status as traditional assets, marking a significant regulatory shift.

The report also highlights that a key condition for lifting the ban is tax reform. Currently, Japan imposes a maximum of 55% comprehensive tax on virtual asset profits. Discussions are underway to adjust this to an approximately 20% separate tax rate. The difference is substantial: a 55% tax rate is among the harshest globally, while a 20% flat rate aligns with taxes on stocks and bonds.

Tax reform is crucial. At a 55% rate, earning 1 million yen in crypto profits would require paying 550,000 yen in taxes, severely dampening investment appetite. Reducing it to 20% would mean only 200,000 yen in taxes on the same profit, increasing net returns by 175%. This tax incentive could significantly boost Japanese investors’ willingness to allocate assets to crypto.

Analysis indicates that easing both taxation and regulation simultaneously will help expand asset allocation options for individual and institutional investors. This dual reform demonstrates Japan’s government’s commitment to developing the crypto market, rather than superficial measures. Legal amendments provide the framework, tax reforms offer economic incentives, and together they will create optimal conditions for Japan’s cryptocurrency ETF market to explode.

Nomura and SBI Lead 6 Asset Managers in Market Entry

The report states that major financial institutions, including SBI Holdings and Nomura Holdings, have begun developing related ETF products. Once approved for listing on the Tokyo Stock Exchange, individual investors are expected to participate in crypto ETF investments through their brokerage accounts, similar to trading stocks or gold ETFs. An earlier survey indicated that at least 6 asset management firms are researching related products, targeting both individual and institutional clients.

Nomura Holdings, Japan’s largest securities firm,’s involvement is highly significant. With deep experience in asset management, investment banking, and retail securities, Nomura’s client base includes millions of individual investors and numerous institutional clients. If Nomura launches a cryptocurrency ETF, it will immediately reach a large potential investor base. Additionally, Nomura’s reputation and risk management capabilities will lend trust to crypto ETFs from traditional financial institutions.

SBI Holdings has a more extensive presence in the crypto space. SBI has already entered crypto exchanges, mining, and blockchain investments, with a deep understanding of crypto technology beyond traditional finance. Their proposed crypto ETF may feature innovative product design and risk management, such as multi-coin ETFs or enhanced ETFs combining staking yields.

At least 6 asset management firms are researching related products, indicating widespread interest in this market within Japan’s financial industry. These may include major firms like Nikko Asset Management, Daiwa Asset Management, and boutique firms focusing on alternative investments. Multiple players entering simultaneously will foster competition, drive product innovation, and reduce costs, ultimately benefiting investors.

Target clients include both individuals and institutions, indicating that Japan’s crypto ETF market will be comprehensive. Retail investors can participate with small amounts via brokerage accounts, far lower than directly buying and storing cryptocurrencies. Institutional investors such as pension funds, insurance companies, and corporate finance departments can allocate crypto assets through ETFs in a compliant manner, without establishing complex custody and risk management systems.

Growth Potential Compared to the US $120 Billion Market

If the Tokyo Stock Exchange approves listing, individual investors will be able to trade crypto ETFs through brokerage accounts, just like stocks or gold ETFs. This convenience will significantly lower the barrier for ordinary investors to access crypto assets. Cryptocurrencies have become an important alternative asset class, but the entry barrier remains high for most retail investors. Transactions and storage via private key-protected digital wallets are technically complex, deterring many traditional investors.

ETFs trade on exchanges like stocks, making buying and selling easier for retail investors. The US and Hong Kong approved their first spot crypto ETFs in 2024. The success in the US provides a valuable reference for Japan. Currently, the total net assets of spot Bitcoin ETFs listed in the US are about 120 billion USD, achieved in less than a year, indicating strong market demand.

Some industry insiders in Japan estimate that the country’s crypto ETF could eventually reach 1 trillion yen (64 billion USD). This forecast is based on Japanese investors’ asset allocation habits and risk preferences. While traditionally conservative, Japanese investors have high acceptance of gold ETFs. If crypto ETFs can offer similar investment convenience and regulatory protections, they could attract a significant proportion of conservative investors.

Despite high volatility, the industry is booming. The global crypto market cap has doubled in three years, reaching about 3 trillion USD. Prominent institutional investors, including pension funds, Harvard University’s endowment, and government-affiliated investors, have begun including Bitcoin ETFs in their portfolios. This institutional trend creates a favorable environment for Japan’s crypto ETF launch.

Regulatory Challenges and Balancing Investor Protection

The UK Financial Conduct Authority (FCA) plans to include cryptocurrencies in the ETF designated asset list, while proposing stronger safeguards to protect investors. This global trend shows that regulators are seeking a balance between opening up crypto investments and safeguarding investors. Japan’s 2028 lifting plan may also include similar protections.

Possible safeguards include: mandatory risk disclosures, investor suitability assessments, leverage limits, and strict regulation of ETF managers. These measures aim to ensure investors understand the risks of crypto assets and prevent improper sales and excessive speculation.

From global experience, the US SEC has been very cautious in approving Bitcoin ETFs, requiring issuers to meet strict surveillance-sharing agreements and market manipulation prevention measures. Japan’s FSA may reference these requirements to establish a suitable regulatory framework for the Japanese market.