Japan Financial Regulator Could Likely Approve Cryptocurrency ETF In the Market

08. Jan 2019 Posted by Akolkar B on News

The latest report from Bloomberg shows that Japan’s financial watchdog - Financial Services Agency (FSA) - is considering the option to approve cryptocurrency exchange-traded-funds (ETFs). Sources familiar with the matter said that the FSA is currently gauging the interest of its local investors in ETF like instruments.

This move is quite surprising considering that last month the FSA rejected any sort of amendments to the national securities laws to accommodate products like crypto futures and options. The Bloomberg report notes that the FSA rejected the changes while “concluding that such products would achieve little besides stoke speculation”.

Well, derivative products like futures and options are likely to bring institutional demand to the market which is currently much required looking to the year-long bear market of 2018. Last year, the FSA showed a huge involvement in the country’s cryptocurrency market after the Japanese cryptocurrency exchange Coincheck was hacked losing $500-million worth of investor’s funds.

The FSA has introduced several regulatory measures over the last year while trying to maintain a balance between FinTech innovation and investor protection. Japan is considered as to be one of the biggest cryptocurrency markets along with the U.S. and launching crypto derivative products can probably drive further institutional participation.

However, it’s been over an year since the first Bitcoin futures were launched but till now they haven’t managed enough to pull big institutional players. Moreover, the uncertain regulatory conditions have also added to delayed response from institutions.

Many experts claim that the arrival of ETF products will likely bring more legitimacy in the eyes of the investors. But U.S. and European regulators have repeatedly shown a cold response to their approval citing reasons to lack of security and market manipulation.

In November, SEC chairman Clayton said that he won’t approve Bitcoin ETF until exchanges take enough measures to work on market manipulation.

“What investors expect is that trading in a commodity that underlies an ETF needs to makes sense and is free from the risk of manipulation. . . It’s an issue that needs to be addressed before I would be comfortable adding digital currency ETFs” he said.