[NEWS] Financial Services Agency reluctant to support cryptocurrency ETF

Hideki Ito, Commissioner of the Financial Services Agency, said in an interview with Bloomberg that the approval of a cryptocurrency spot ETF in Japan "needs careful consideration."

In the interview, Commissioner Ito said that many people believe that "cryptocurrency does not necessarily contribute to the creation of wealth for the Japanese people in a stable and long-term manner." The Commissioner's remarks were the opposite of the softening stance of global regulators toward spot ETFs that directly invest in Bitcoin (BTC) and Ethereum (ETH).

The SEC reluctantly approved the first Bitcoin spot ETF in January, following a 2023 court reversal in a lawsuit filed by Grayscale.

Bitcoin spot ETFs have been a huge success, attracting $19.2 billion (approximately 2.8 trillion yen) in asset inflows to date. The United States has also approved an Ethereum spot ETF.

Cryptocurrency spot ETFs have also been approved in Hong Kong, Australia, and the UK this year. Other countries have taken a "much more conservative stance toward retail cryptocurrency investment," said Ito, who only took up his post in July.

Hack incidents may be to blame

Demand for crypto spot ETFs has certainly been declining recently in tandem with the broader selloff in the cryptocurrency market.

Bitcoin prices fell 16% earlier this week, briefly dropping below $50,000. Ethereum lost a fifth of its value. They have since recovered slightly, with Bitcoin now above $60,000 and Ethereum above $3,500.

Like his predecessor, Ito is a career bureaucrat who joined the Ministry of Finance in 1998. He started his career as the Director-General of the Regional Banking Supervision Bureau and has held various positions in both the Ministry of Finance and the Financial Services Agency.

Most recently, he played a central role in the FSA's efforts to incorporate household assets and promote a self-sustaining growth cycle in the economy.

The FSA is now more rigorously reviewing whether investment products and services are appropriate for investors based on past knowledge and experience.

Ito said the FSA will maintain a "pro-technology stance" and that it does not intend to completely deny the possibility of a cryptocurrency spot ETF.

"Still, there are points to consider as to whether the general public should be encouraged to invest in crypto assets," he added.

The background to this is the checkered history of Japan's cryptocurrency industry. Mt. Gox, a cryptocurrency exchange that was a pioneer in the cryptocurrency field, was hacked and lost a large amount of assets. According to cryptocurrency analysis company Chinalysis, DMM Bitcoin lost $310 million (about 45.5 billion yen) in June in the seventh largest hack in history. In light of these incidents, Ito may not lose his cautious stance.

Reference: Bloomberg
Image: Shutterstock

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