(Bloomberg) -- The head of Japan’s finance regulator said “cautious consideration” is needed in deciding whether to follow the likes of Hong Kong and the US by approving crypto-linked exchange-traded funds.
Many people believe cryptoassets “do not necessarily contribute to the wealth creation of the Japanese people in a stable and long-term manner,” said Hideki Ito, commissioner of the Financial Services Agency, in an interview.
His remarks come after a softening in the stance of regulators globally on ETFs that invest directly in Bitcoin and Ether. The US Securities and Exchange Committee grudgingly gave the green light to the first spot-Bitcoin ETFs in January after a 2023 court reversal in a case brought by Grayscale Investments LLC. Those products have drawn net inflows of $19.2 billion to date. The first Ether-linked ETFs went live in the US in July.
Similar funds have also debuted this year in Hong Kong, Australia and the UK. Other nations have taken a far more “conservative stance toward crypto investment by retail investors,” said Ito, who took over as commissioner in July.
Demand for crypto ETFs has waned lately in tandem with a broad selloff in crypto markets. Bitcoin sank as much as 16% on Monday to below $50,000 while Ether at one point had shed over a fifth of its value. The tokens have recovered some of those losses since.
Like his predecessors, Ito, 59, is a career bureaucrat who joined the Ministry of Finance in 1988. He rose through the ranks in various roles at both the ministry and the FSA, including a stint as head of regional bank supervision.
More recently, he has played a central role in the FSA’s efforts to mobilize household assets to foster a self-sustaining economic growth cycle. At the same time the FSA has been applying more scrutiny to whether investment products and services are a good fit for investors based on their knowledge and experience.
The agency wants to maintain a “pro-technology stance,” Ito said, and will not rule out the possibility of a crypto ETF entirely. “Still, there are things we need to consider when it comes to whether the general public should be encouraged to invest in these,” he added.
Japan’s crypto industry has a checkered history. Customers of Tokyo-based crypto exchange Mt. Gox, one of the sector’s early-movers, are only now beginning to recoup tokens lost to a major hack more than a decade ago. In June, DMM Bitcoin lost $301 million to the seventh-biggest crypto hack on record, according to Chainalysis.
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