Japan’s ruling Liberal Democratic Party (LDP) has called on the government to establish a legal framework for introducing spot exchange-traded funds (ETFs) for cryptocurrencies and to foster a yen-based stablecoin market. This move follows similar initiatives in the U.S. and Hong Kong, as Japan accelerates its efforts to regulate digital assets.
CoinDesk reported on Monday that the LDP recently submitted a proposal to the government outlining measures to permit trading of spot crypto ETFs and expand the use of yen-based stablecoins.
The proposal was presented to Finance Minister Satsuki Katayama, who also oversees Japan’s Financial Services Agency (FSA).
In their proposal, the LDP argued that crypto ETFs are more accessible and easier for investors to understand. They noted that these investment vehicles could lower market entry barriers by allowing participation without direct cryptocurrency ownership.
The Japanese government has been ramping up its efforts to reform cryptocurrency regulations.
In April, lawmakers passed an amendment to the Financial Instruments and Exchange Act, reclassifying cryptocurrencies as financial products. This marks a shift from the previous approach, which primarily viewed digital assets as payment methods under the Payment Services Act. The new classification acknowledges the investment potential of cryptocurrencies and aims to establish a more appropriate regulatory framework.
If implemented, this framework would position Japan alongside other major financial markets like the U.S. and Hong Kong in permitting spot crypto ETFs. This would enable investors to gain exposure to cryptocurrencies indirectly through ETFs, without the need to purchase and manage digital assets directly.
Japan is also pushing for the development of yen-based stablecoins. The global stablecoin market, currently valued at around 315 billion USD, is predominantly composed of dollar-based tokens.
This dollar dominance has raised concerns in many countries about the potential weakening of their national currencies and payment systems.
The LDP’s advocacy for yen-based stablecoins can be seen as a strategic move to address these concerns and maintain Japan’s financial sovereignty.
An industry insider commented that as the U.S. develops its regulatory framework for spot ETFs and stablecoins, it’s seeing a rapid influx of global capital. Japan appears to be following suit, aiming to secure its position in the digital asset space through ETF approvals and the promotion of yen-based stablecoins.