The Financial Services Agency (FSA) of Japan have recently been contemplating Bitcoin futures and derivatives trading, but they set back investors when they decided to bar these types of instruments. Considering the fact that Japan is one of the largest markets for cryptocurrencies, the decision to opt out of this option alone separates the industry further from the institutional investments that could support it. However, it looks like the concept of exchange-traded funds could be on the table, according to “a person familiar with the matter” who spoke with Bloomberg.
Bloomberg reports that the Liberal Democratic Party plans to enter a draft legislation that could create amendments that make room for ETFs by March of this year. The bill would bring in self-regulatory oversight for the entire local industry, stating that tokens in ICOs count as securities.
This bill would realistically take until 2020 to go into effect. However, the same report shows that the approval of trading crypto derivatives on financial exchanges would no longer be on the ballot for approval. If it was, the FSA believes that speculation would be the main issue that gets attention.
The local regulators in Japan have been increasingly strict about the way that the cryptocurrency industry runs after a hack against the Coincheck exchange a year ago. At the time, the hackers managed to steal over half a billion dollars in cryptocurrency. However, their interest in crypto ETFs would help to bring in new institutional investors and capital into the industry, which not all market observers support.
The launch of a crypto ETF is already in the works for multiple participants in the US market, though the Securities and Exchange Commission (SEC) is still mulling over the approvals. In August, the SEC opted against nine Bitcoin ETF applications, which they said was meant “to prevent fraudulent and manipulative acts and practices”. They have even postponed one of the applications, which came from VanEck/SolidX, from a December discussion to February.
Jay Clayton, the SEC chairman, commented in November that the idea of approving a crypto ETF would not even be approached until market manipulation can be addressed and eliminated.
A securities lawyer, Jake Chervinsky, stood with that notion, commenting,
“It's true that a proposed rule change is auto-approved if the SEC doesn't make a decision by the deadline, but in reality, it would never happen. The SEC has enough staff to put out a decision, even if it's a one-pager saying, ‘denied for reasons to be explained later.’”