Japan could see its first exchange-traded funds (ETFs) investing in cryptocurrencies as early as 2028, providing retail investors with easier access to bitcoin and other digital tokens already held by major institutions.

The Financial Services Agency (FSA) plans to add cryptocurrencies to the list of specified assets eligible for ETFs, while proposing stronger safeguards to protect investors, Nikkei has reported.

Nomura Holdings and SBI Holdings are among the financial groups preparing to launch Japan’s first crypto ETFs, which would require approval from the Tokyo Stock Exchange before listing.

Cryptocurrencies have emerged as a significant alternative asset class, but entry barriers for ordinary investors remain high.

Bitcoin and other digital assets are traded and stored in digital wallets secured by private keys. In contrast, ETFs trade on stock exchanges, making them simpler for retail investors to buy and sell.

The US and Hong Kong approved their first spot crypto ETFs in 2024.

Although cryptocurrency prices are volatile, the sector continues to grow. Global crypto market capitalisation has tripled over the past three years to around US$3 trillion.

Pension funds, endowment funds for major universities such as Harvard, and government-affiliated investors have begun including bitcoin ETFs in their portfolios.

The total net assets of US-listed spot bitcoin ETFs now stand at roughly US$120 billion.

Some in Japan’s asset management industry estimate that Japanese crypto ETFs could eventually reach 1 trillion yen.

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