Will Cryptocurrency Spot ETFs Be Approved in Japan?

An ETF (Exchange Traded Fund) is an investment trust listed on a stock exchange. There are two types: index-based, which tracks a specific index such as the Nikkei Stock Average, and active-based, which does not have such an index.

It may be obvious to those interested in finance, but to explain it simply, it is easy to understand if you think of it as a packaged product that contains a small number of securities such as stocks handled by a stock exchange. Since you can invest in multiple stocks selected by the stock exchange all at once, it is easy to hedge risks and the initial investment costs are low. Furthermore, index-based funds have less volatility and are more stable than investing in a single company, making them a popular financial product for beginner investors.

In January of this year, the SEC announced that it had approved a Bitcoin spot ETF. Although the SEC approved a Bitcoin futures ETF in 2021, it had not approved a Bitcoin spot ETF for nearly the past 10 years.

The SEC cited "risk of price manipulation" as the reason for this, but in 2023, the SEC lost a lawsuit that found it wrong to refuse to convert untraded funds managed with Bitcoin into ETFs. The SEC can no longer continue to refuse cryptocurrency spot ETFs. Four months later, an Ethereum spot ETF was approved, as if to open the floodgates.

SEC Chairman Gary Gensler has stated that he is still skeptical of cryptocurrency trading, and has warned that investors should be careful about products whose value is tied to cryptocurrency. However, with the SEC's approval, there is no doubt that cryptocurrency, which has been viewed as a "speculative product," has taken its first step as an "investment product."

This year, the US presidential election will also be held, so depending on the results, the SEC chairman may be replaced. In some cases, it is possible that legislation for cryptocurrency ETFs will be actively developed. By the way, it should be noted that Trump, who was anti-cryptocurrency, has taken a conciliatory stance in this presidential election.

Characteristics of cryptocurrency ETFs

• Some are made up of multiple cryptocurrencies
• Trading rules follow those of the stock exchange and securities company
• Being listed on a stock exchange ensures transparency and liquidity of transactions