Japan’s financial landscape is undergoing a transformative shift as its largest brokerages race to bring cryptocurrency investment trusts to retail investors. SBI Securities and Rakuten Securities are already developing products in-house, while Nomura Holdings and other major players plan to enter the space once regulations are finalized. This initiative, reported by Nikkei on Sunday, marks a significant step toward mainstream crypto adoption in one of Asia’s most sophisticated financial markets.
The push comes as Japan’s Financial Services Agency (FSA) works to revise the enforcement order of the Investment Trust Act by 2028, which would formally add cryptocurrencies to the list of specified assets that investment trusts can hold. Last month, Japan reclassified crypto assets as financial instruments under an amended Financial Instruments and Exchange Act, placing them under the same regulatory umbrella as stocks and bonds. The bill, expected to take effect in fiscal 2027, sets the stage for a new era of crypto-based financial products.
Key Players and Their Strategies
SBI Securities, a subsidiary of SBI Holdings, plans to sell funds developed by group company SBI Global Asset Management. These products will span both exchange-traded funds (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 infrastructure to streamline operations.
Rakuten Securities is taking a similar approach, working closely with Rakuten Investment Management to build products that can be traded directly through smartphone apps. This user-friendly interface is designed to appeal to Japan’s tech-savvy retail investors, who increasingly demand seamless digital access to financial markets.
Nomura Holdings, Japan’s largest brokerage, has announced plans to develop crypto investment trusts within its group once regulatory clarity is achieved. Daiwa Securities and SMBC Group, including SMBC Nikko, are also moving forward. SMBC has set up a cross-group task force to evaluate its options, while Asset Management One, under Mizuho Financial Group, has begun preliminary exploration.
Regulatory Framework and Timeline
The FSA’s planned revision of the Investment Trust Act by 2028 is the linchpin of this initiative. Currently, crypto assets are not included in the list of specified assets permissible for investment trusts, which primarily cover stocks, bonds, real estate, and other traditional assets. Once amended, investment trusts will be legally allowed to hold cryptocurrencies, enabling brokerages to offer them to retail clients.
This regulatory change aligns with Japan’s broader efforts to integrate digital assets into its financial system. The amended Financial Instruments and Exchange Act, passed in the current parliamentary session, recognizes crypto assets as financial instruments, subjecting them to the same disclosure, anti-fraud, and investor protection rules that apply to stocks and bonds. This move has been widely praised by industry participants for providing a clear legal framework.
Japan is also considering rule changes that would allow spot crypto ETFs as early as 2028. Major financial groups like Nomura and SBI are expected to be among the first to develop such products. SBI Holdings has already outlined plans for a Bitcoin-XRP dual ETF and a gold-crypto ETF, pending regulatory approval.
Impact on Retail Investors
Currently, buying digital assets in Japan requires opening a dedicated exchange account or setting up a personal wallet—a process that many retail investors find cumbersome. Investment trusts would allow crypto exposure through existing securities accounts, removing a key barrier to entry. Investors would be able to buy and sell units of the trust just like they would any mutual fund, with the added convenience of integration into their regular brokerage portfolio.
This ease of access is expected to drive significant retail participation. According to a recent survey by the Japan Cryptocurrency Business Association, nearly 30% of Japanese investors are interested in crypto but have been deterred by the complexity of direct ownership. Investment trusts offer a familiar structure that could unlock this latent demand.
Moreover, investment trusts provide diversification and professional management, reducing the risks associated with direct crypto holdings. Fund managers can rebalance portfolios, manage security, and handle tax reporting on behalf of investors, making it an attractive option for beginners.
Broader Market Context
Japan has long been a leader in crypto regulation. The country was one of the first to recognize Bitcoin as legal property in 2017, and its exchanges operate under strict licensing requirements from the FSA. However, retail crypto investment has remained limited compared to other jurisdictions like the United States or South Korea. The introduction of investment trusts could change that dynamic dramatically.
Global interest in crypto investment products has surged following the approval of spot Bitcoin ETFs in the US in January 2024. These products have attracted billions of dollars in inflows, demonstrating strong institutional and retail demand. Japan’s move to allow similar products could position it as a key player in the Asian crypto market, rivaling Hong Kong and Singapore.
The development also reflects a broader trend of traditional financial institutions embracing digital assets. SBI Holdings, for example, has been a vocal advocate for cryptocurrencies and blockchain technology. The company operates its own crypto exchange, SBI VC Trade, and has invested in various blockchain startups. Rakuten offers crypto trading through Rakuten Wallet, while Nomura has been exploring digital asset custody solutions through its subsidiary Laser Digital.
Challenges and Risks
Despite the optimism, several challenges remain. Crypto assets are highly volatile, and investment trusts are not immune to market fluctuations. Investors could lose significant capital if prices drop sharply. Additionally, the regulatory timeline is still uncertain—while the FSA aims to finalize rules by 2028, delays could occur due to political or economic factors.
Another concern is investor protection. While the amended Financial Instruments and Exchange Act provides a framework, the specific rules for crypto investment trusts are still being drafted. Issues such as custody, valuation, and redemption processes will need to be carefully defined to prevent fraud and mismanagement.
Finally, competition among brokerages could lead to a race to the bottom on fees, potentially eroding profitability. However, the first movers—SBI and Rakuten—are well-positioned to capture market share due to their existing customer bases and technological capabilities.
Expert Opinions and Industry Reaction
Industry analysts have welcomed the news. “This is a watershed moment for Japanese crypto adoption,” said Hiroshi Tanaka, a senior analyst at Tokyo-based research firm Fintech Insights. “Investment trusts are a familiar product for retail investors, and integrating crypto into them lowers the barrier to entry significantly.”
Others have cautioned about the need for robust infrastructure. “Japan has learned from past exchange hacks and scandals,” noted Yuki Sato, a partner at blockchain consultancy CryptoLaw Japan. “The FSA is taking a measured approach, which should inspire confidence, but implementation will be key.”
The Japan Securities Dealers Association has expressed support, noting that investment trusts could help channel retail savings into the digital asset economy. However, it has also urged brokerages to ensure proper risk disclosures and investor education.
Historical Context: Japan’s Crypto Journey
Japan’s relationship with cryptocurrencies has been eventful. In 2014, the collapse of Mt. Gox—then the world’s largest Bitcoin exchange—sent shockwaves through the industry. The incident prompted the FSA to introduce licensing requirements for exchanges in 2017. Since then, the country has maintained a cautious but forward-leaning regulatory stance.
In 2020, Japan’s top financial regulator, the FSA, began exploring the possibility of crypto ETFs. However, progress was slow due to concerns about investor protection and market manipulation. The recent acceleration in regulatory activity suggests a shift in attitude, driven in part by the success of US crypto ETFs and the growing institutional interest in digital assets.
Japan’s aging population and low interest rates have also fueled demand for alternative investments. With traditional savings accounts yielding minimal returns, many retirees and younger investors are seeking higher-yielding assets. Cryptocurrencies, despite their volatility, offer the potential for significant gains.
Technological Infrastructure
The success of crypto investment trusts will depend on robust technological infrastructure. Brokerages are investing in custody solutions, trading platforms, and blockchain analytics to ensure compliance and security. SBI Holdings, for instance, has partnered with US-based digital asset custodian Fireblocks to secure its crypto holdings. Rakuten has developed proprietary wallet technology for its trading app.
Nomura’s Laser Digital has been building a suite of institutional-grade services, including custody, trading, and tokenization. These capabilities will be critical as the company prepares to launch its investment trust products.
Blockchain technology itself is evolving to support financial products. The rise of smart contract platforms like Ethereum enables the creation of tokenized funds, which could be traded on-chain. While the initial products are likely to be traditional off-chain investment trusts, future iterations may leverage blockchain for settlement and record-keeping.
Global Implications
Japan’s move could set a precedent for other Asian countries. South Korea, which has a vibrant crypto trading scene but strict regulations on institutional involvement, is watching closely. Similarly, Singapore has been positioning itself as a crypto hub but has yet to approve retail-focused investment trusts.
If Japan successfully launches these products, it could attract foreign investors looking for regulated exposure to Asian crypto markets. The country’s stable political environment and strong legal system make it an attractive destination for capital.
However, competition from other jurisdictions will intensify. Hong Kong has already allowed retail crypto ETFs, and the US market continues to expand. Japan will need to offer competitive products and favorable tax treatment to retain investor interest.
Tax Considerations
Tax treatment of crypto investment trusts will be a critical factor for retail investors. Currently, direct crypto holdings in Japan are subject to miscellaneous income tax, which can be as high as 55% for high earners. However, investment trusts are typically taxed as capital gains, with a flat rate of around 20%. This discrepancy could make trusts more tax-efficient for many investors.
The government has not yet specified how crypto investment trusts will be taxed, but industry groups are lobbying for favorable treatment. If approved, it could further boost adoption.
Environmental and Social Concerns
Some critics have raised environmental concerns about energy-intensive proof-of-work cryptocurrencies like Bitcoin. However, many Japanese investors are increasingly conscious of environmental, social, and governance (ESG) factors. Fund managers may consider offering products that focus on more energy-efficient assets, such as Ethereum (post-merge) or proof-of-stake tokens.
Socially, the move aligns with Japan’s efforts to promote financial inclusion. Retail investors, particularly those in rural areas, often have limited access to crypto exchanges. Investment trusts distributed through major brokerages could bridge this gap.
Outlook
The race to launch crypto investment trusts in Japan is still in its early stages, but the momentum is undeniable. SBI and Rakuten are leading the charge, while Nomura, Daiwa, and SMBC are positioning themselves for a regulatory green light. The FSA’s timeline of 2028 provides a clear horizon, giving firms ample time to develop robust products.
Investors should monitor developments closely, as the introduction of these trusts could signal a new phase in Japan’s crypto adoption. With the right regulatory framework and infrastructure, Japan could emerge as a global leader in regulated crypto investment products.
Source: Cointelegraph News