Japan's Financial Regulator Abandons Crypto Futures Plans, ETFs Still Possible

Japan’s financial regulator, the Financial Services Agency (FSA), has reportedly decided not to move forward with its plans to allow listed derivatives based on digital currencies.

However, the FSA could still approve crypto exchange-traded-funds (ETFs) that are used to track the prices of digital assets, according to Bloomberg. Sources familiar with the matter also noted that the FSA’s decision to not allow bitcoin futures or ether (ETH) options in one of the world’s largest markets for cryptoassets could be seen as a setback for investors.

Financial Services Agency (FSA) Increases Regulatory Oversight After Hacks

In the US, the Chicago-based Cboe and CME Group introduced bitcoin futures in December 2017, however the crypto market did not respond as well as expected to the new financial product. According to analysts, institutional investors could make more investments in the digital asset market this year. Although cryptocurrency prices still remain relatively low, and prominent analysts including Tone Vays and Willy Woo have predicted that the bear market will likely continue, the approval of a crypto ETF in Japan could potentially encourage more institutional investors to enter the digital asset ecosystem.

After the devastating hack of cryptocurrency exchange, Coincheck (in late January 2018) during which over $534 million worth of NEM (XEM) tokens were stolen, the FSA had increased its scrutiny of local exchanges and other crypto-related businesses. Japan’s financial regulator has performed many on-site inspections of the country’s crypto trading platforms throughout last year. Moreover, the FSA has only licensed 16 exchanges to operate in the country, while not issuing any new licenses to other crypto-related firms during 2018.

Notably, there are around 190 digital currency firms looking to operate in Japan, and the FSA is presently assessing the overall demand for a crypto ETF in the Asian country’s $5 trillion economy. Last month, the FSA decided not to make changes to Japan’s securities laws - in order to accommodate crypto futures and options so that they may be listed on local exchanges.

Crypto Futures And Options Will Only Increase Speculation

In an official statement, the Japanese regulator had said that crypto futures contracts would not be suitable for the nation’s markets as they would only increase speculation. The FSA’s stance regarding bitcoin ETFs comes after an extensive year-long investigation of what caused the Coincheck hack and various other online security breaches.

Although the FSA will not be allowing crypto derivatives products, it has decided to give more oversight power to the country’s self-regulatory digital currency and blockchain-related firms. Additionally, the FSA will be monitoring the crypto space more closely while placing most initial coin offerings (ICOs) under the scope of local securities laws.

Japan’s government is also reportedly planning to make various changes to the existing securities laws, the Payments Services Act, and the Financial Instruments and Exchange Act.