Japan's major financial institutions are positioning themselves to offer crypto investment trusts to retail investors, according to a recent report by Nikkei. SBI Securities and Rakuten Securities are already developing products internally, while Nomura, Daiwa, and SMBC are actively planning their entries once the regulatory framework is fully in place. This development marks a significant milestone for Japan's crypto market, which has long been at the forefront of digital asset regulation in Asia.
Japan's Financial Services Agency (FSA) is preparing to revise the enforcement order of the Investment Trust Act by 2028, formally allowing investment trusts to hold cryptocurrencies as specified assets. This regulatory change builds on last month's reclassification of crypto assets as financial instruments under the amended Financial Instruments and Exchange Act, which brought them under the same umbrella as stocks and bonds. The bill, if passed in the current parliamentary session, is expected to take effect in fiscal 2027.
SBI Securities plans to sell funds developed by its group company, SBI Global Asset Management, covering both ETFs and investment trusts focused on liquid assets like Bitcoin and Ethereum. The group intends to handle everything from product development to distribution in-house, leveraging its existing ecosystem of crypto exchange and custody services. SBI Holdings has already outlined plans for a Bitcoin-XRP dual ETF and a gold-crypto ETF, pending regulatory approval.
Rakuten Securities is taking a similar approach, working with Rakuten Investment Management to build products that can be traded directly through smartphone apps, making crypto exposure as easy as buying a stock or bond. This approach removes the need for retail investors to open a separate crypto exchange account or manage private wallets, significantly lowering the barrier to entry for ordinary Japanese investors.
Nomura, Japan's largest brokerage, has also announced plans to develop crypto investment trusts within its group. Daiwa Securities and SMBC Nikko are following suit, with SMBC Group setting up a cross-group task force to evaluate options. Asset Management One, under Mizuho Financial Group, has begun preliminary exploration. This broad institutional interest signals that Japan's financial establishment sees crypto as a viable asset class for mainstream portfolios.
Regulatory Shifts Paving the Way
Japan's progressive stance on cryptocurrency regulation has been a key factor in the current momentum. In 2024, Japan passed a law legalizing crypto funds, and the current revisions aim to extend that to investment trusts. The country has historically been cautious after the controversial Mt. Gox collapse and the hack of Coincheck, but it has since established one of the most comprehensive regulatory frameworks in the world. The FSA's move to reclassify crypto as financial instruments is a critical step, as it brings digital assets under the same investor protection rules as traditional securities.
Under the revised Investment Trust Act, crypto assets will be added to the list of specified assets that investment trusts can hold, alongside stocks, bonds, real estate, and commodities. This classification is expected to attract institutional capital that was previously sidelined due to regulatory uncertainty. Investment trusts are popular vehicles in Japan, offering diversified exposure with professional management, and are widely held by retail investors through brokerage accounts, banks, and even post offices.
Impact on Retail Investors
Currently, buying cryptocurrency in Japan typically requires opening an account with a licensed crypto exchange, which involves a separate signup process, identity verification, and often a separate wallet setup. While Japan has many exchanges like bitFlyer, Coincheck, and SBI's own exchange, the friction of managing multiple accounts deters many potential investors. Investment trusts allow crypto exposure through existing securities accounts, often with automatic reinvestment of dividends and tax-efficient structures.
This shift is expected to broaden the retail investor base significantly. Japan has a high household savings rate, but retail participation in crypto has been limited due to complexity and trust issues. By embedding crypto within familiar investment products, brokerages aim to attract older, more conservative investors who would never consider buying an altcoin on an exchange. The move also aligns with Japan's push to increase household financial asset returns, as the government encourages more risk-taking given the prolonged low-interest-rate environment.
Furthermore, the inclusion of crypto in investment trusts will allow investors to gain diversified exposure without having to pick individual tokens. Products like SBI's Bitcoin-XRP dual ETF or a gold-crypto hybrid offer built-in diversification, which may appeal to risk-averse investors seeking to hedge against inflation or currency depreciation. The use of existing securities infrastructure also simplifies compliance for tax reporting, as capital gains on crypto held in trusts will be handled just like other investments.
Broader Industry Context
Japan's move is part of a global trend toward mainstreaming crypto assets through regulated funds. In the United States, the approval of spot Bitcoin ETFs in January 2024 triggered a wave of institutional adoption, with billions flowing into these products. In Hong Kong, crypto ETFs launched in April 2024, and other jurisdictions like Australia, Brazil, and several European countries have followed suit. Japan's approach is unique in focusing on investment trusts, which are more aligned with its domestic market structure.
The Japanese government has been increasingly supportive of web3 and blockchain technology, with Prime Minister Fumio Kishida's administration launching a web3 task force and promoting Japan as a hub for blockchain innovation. The country has also relaxed listing rules for crypto tokens, making it easier for exchanges to offer new assets. At the same time, Japan has tightened anti-money laundering regulations, requiring real estate and crypto sectors to enhance checks on property deals and transaction monitoring.
However, challenges remain. The crypto market is volatile, and investment trusts will need to navigate liquidity, custody, and pricing issues. Japanese regulators are cautious about consumer protection and may impose strict rules on leverage, eligible assets, and marketing. The timeline of 2028 gives brokerages time to build robust infrastructure, but some may launch pilot products earlier if permitted. SBI, with its existing crypto exchange Bitbank and custody services, is best positioned to lead the charge.
Another consideration is taxation. Currently, crypto income in Japan is classified as miscellaneous income, with progressive tax rates up to 55%. However, investment trusts are taxed as capital gains with a lower flat rate (currently 20.315% for securities). This favorable tax treatment could be a major driver of adoption. If crypto held in trusts is taxed at the lower rate, it would provide a strong incentive for retail investors to switch from direct holdings to trust products.
Competition Among Brokerages
The race to launch crypto investment trusts is intensifying competition among Japan's largest financial groups. SBI Holdings has been the most aggressive, building a comprehensive crypto ecosystem that includes a mining operation, exchange, and now asset management. Its partnership with Ripple and focus on XRP gives it a distinctive positioning. Nomura, traditionally more conservative, has been exploring crypto since 2020 through its digital asset arm, Laser Digital. Daiwa and SMBC are taking a collaborative approach, forming task forces to pool expertise.
Rakuten, already a major player in e-commerce and fintech, sees crypto as a natural extension of its financial services. By integrating investment trusts with its smartphone app, Rakuten can leverage its massive user base to drive adoption. The company already operates a crypto exchange and issues its own reward points, creating a seamless ecosystem. Smaller brokers and regional banks are also expected to offer these products through white-label arrangements, broadening access nationwide.
Foreign firms are also eyeing the Japanese market. BlackRock and Fidelity, which dominate the US crypto ETF space, may seek partnerships with Japanese firms to distribute their products. However, Japan's regulatory environment and the preference for locally domiciled funds could favor home-grown products. The FSA's decision to allow only certain types of investment trusts initially may also slow foreign entry.
The development of crypto investment trusts is a watershed moment for Japan's financial industry. It represents the culmination of years of regulatory evolution and signals that digital assets are becoming a permanent part of the investment landscape. For retail investors, the path to crypto exposure just got a lot simpler.
Source: Cointelegraph News