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Japanese Regulator Set to Sideline Crypto Trusts

Tim Alper
Last updated: | 2 min read

Japan could shun cryptocurrency investment trust offerings – while some of the country’s top financial companies have established a securities token association.

Source: iStock/ilbusca

The regulatory Financial Services Agency – the body that polices the country’s exchanges and cryptocurrency businesses – has provisionally updated its guidelines on financial instruments. The agency stated, in an official release,

“It appears that financial products that involve investments in [cryptocurrencies] will be created in the future, but there are also indications that investment in [cryptocurrencies] would encourage speculation. The FSA believes that it should carefully handle the sale of investment trusts that invest in such assets.”

In an accompanying document, however, the FSA went further, stating that trusts that invest in cryptocurrencies could be deemed “inappropriate,” as investment trusts were “mainly intended to be invested in specific assets.” The FSA has ruled that cryptocurrencies, however, should be classified as “non-specific assets.”

Although the FSA has begun a one-month consultation period for its proposal, the agency has proven very difficult to sway on cryptocurrency-related matters in the past.

Per media outlet iForex Japan, the move will at least make cryptocurrency trust offerings “very difficult” in the country.

Even though the possibility of companies ignoring the guidelines and offering deregulated trust products is impossible to rule out, few cryptocurrency or financial companies have dared stand up to the FSA in the past, and most are likely to fall in line with the agency’s ruling.

Meanwhile, six of the country’s largest financial firms have joined forces to create a Japanese Security Token Offering (STO) self-governing association. The group comprises three cryptocurrency exchange operators – the Monex Group (owner of the Coincheck exchange), as well as Rakuten and SBI’s securities arms (both operate their own exchange platforms). The remaining three companies are big-hitting conventional finance companies, namely: Daiwa Securities, Kabu and Nomura Securities.

Per a Monex statement, the group has appointed the highly influential and crypto-keen Yoshitaka Kitao, CEO of SBI and a Ripple board member, as its president, and is seeking to gain official recognition as a self-governing body from regulatory authorities such as the FSA.

The new body, named the Japan Security Token Offering Association, says that “sufficient conditions are in place for STOs to become widely used in Japan. The association says it was formed “so that STO business opportunities can be explored and developed in Japan.”