No Crypto Futures in Japan, but ETFs Plans Still Give Hope to the Bulls

Japan – one of the most crypto-friendly countries – is taking a step back. Japan's supervisor – Financial Services Agency (FSA) –  was planning to allow crypto derivatives, but according to Bloomberg's sources is going to bar the initiative. However, the financial watchdog may approve crypto exchange-traded funds (ETFs). An ETF is a security that tracks a stock index, a commodity, bonds, or a basket of assets.

Japan decided to ban Bitcoin futures and Ethereum options, which is a big disappointment for cryptocurrency bulls. The attitude of governments and regulators towards financial innovations is the main fundamental uncertainty deciding about the long term attractiveness of altcoins.

That is why the mere chance of introducing ETFs tracking digital assets in Japan could be a positive impulse for the markets. The move could improve the security and build up confidence in cryptocurrencies.

The decision is a result of an investigation of the Coincheck exchange hack which led to stealing $500 million in digital tokens that happened a year ago.

FSA decided to take a conservative attitude. Japan dropped support for crypto derivatives, and the supervisor will give more oversight power to self-regulatory bodies. Additionally, FSA will cap the leverage that can be offered by crypto brokers.

Japan’s decision to shelve plans for crypto derivatives comes a year after Cboe Global Markets Inc. and CME Group Inc. listed futures tracking Bitcoin. The instruments have attracted growing but still, limited demand from institutional investors, with combined open interest across both currently at about $81 million, according to exchange data – writes Bloomberg's Yuji Nakamura.

The legality of ETFs in Japan is one of the key threads to follow on global cryptocurrency markets. At the moment this kind of products is available in Switzerland. In November 2018 Amun Crypto Basket Index ETP was introduced. The instrument is traded under the symbol ‘HODL’ – the global slogan of crypto bulls. HODL averages less than $1 million in daily turnover.

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The Japanese market has much bigger potential as the Tokyo Stock Exchange provides more liquidity.  Japan’s ETF market is worth $335 billion.