On January 7, CCN.com reported that the Financial Services Agency (FSA) of Japan is considering the approval of the country’s first Bitcoin exchange-traded fund (ETF).
With the final deadline of the VanEck Bitcoin ETF on the horizon, could the approval of a Bitcoin ETF in Japan have an impact on the decision of the U.S. Securities and Exchange Commission (SEC)?
The probability of the approval of a Bitcoin ETF in the U.S. by February remains low. A pro-crypto SEC commissioner Hester Peirce previously said that investors should not wait on a Bitcoin ETF because it may take days or years for the commission to approve it.
Whether the ETF gets approved or not, the filing of a VanEck ETF will provide more clarity on the subject.
In the second half of 2018, the SEC rejected 12 Bitcoin ETFs submitted by the Winklevoss twins and three other companies. The Winklevoss twins attempted to launch an ETF using cryptocurrency exchanges to calculate the base price of the asset and the three companies relied on the Bitcoin futures market to develop an ETF.
All 11 filings were rejected by the SEC because it believed that both exchanges and the futures market are not of significant size.
The VanEck ETF uses data from the over-the-counter (OTC) market, which is said to be bigger than the cryptocurrency exchange market in terms of volume and trading activity.
Regardless of the result, it will lead the SEC to evaluate the global cryptocurrency OTC market and also consider the tightening regulatory frameworks in major overseas markets.
Japan, South Korea, Singapore, Malta, and other regions have implemented strict policies on Know Your Customer (KYC) and Anti-Money Laundering (AML), monitoring suspicious transactions and disallowing anonymous accounts from trading cryptocurrencies.
In late November of last year, SEC chairman Jay Clayton said that safeguards and technologies to prevent suspicious transactions are non-existent in overseas markets.
Those kinds of safeguards don’t exist in many of the markets where digital currencies trade.
With the lead of Japan and the G20’s move to regulate cryptocurrencies, many major Bitcoin and crypto asset markets have implemented various safeguards. Some regions like South Korea have implemented stricter rules than the U.S., specifically on the prohibition of foreigners and unidentified individuals from trading cryptocurrencies with the Korean won.
If a Bitcoin ETF is approved in Japan before the U.S., there exists a possibility that it may lead the U.S. government to approve a Bitcoin ETF in its local market.
Japan remains as the only country to have integrated a national licensing program for cryptocurrency exchanges, only allowing a handful of exchanges that are fully compliant with existing regulations to operate within the country.
Currently, the time frame of the FSA’s decision on the approval of Bitcoin ETFs is uncertain and it may also take many months for the government to come to a consensus on the subject.
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Last modified: March 4, 2021 3:18 PM