Japan's Financial Services Agency: Crypto investment vehicles are not investment trusts

Author: Xiu MU

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The Japanese Financial Services Agency (FSA) explained the rules regarding the creation and sale of cryptocurrency ETFs.

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According to Bitcoin.com, an FSA spokesperson said that according to Japan's Investment Trust Law, an investment vehicle needs to correspond to an "investment trust" to become an investment fund. The regulator believes that because crypto asset investment vehicles do not meet the legal definition of "investment trust", it is not possible to create a crypto ETF.

An FSA spokesperson said, "The Comprehensive Guidelines on Financial Instrument Business Operator Supervision, etc., passed on December 27, 2019 stipulates that the creation or sale of investment funds involving assets other than specific assets is unacceptable."

The specific assets mentioned here refer to other assets such as securities and real estate designated by the Japanese government to promote investment. The FSA emphasized that "cryptocurrencies are not specific assets in the definition."

Some investment trusts use a small portion of their funds for crypto assets, which are not their main investment assets. The FSA states that non-specific assets, including cryptocurrencies, "have a high price volatility or liquidity risk." The FSA also believes that investment trusts that invest not in cryptocurrencies but in cryptocurrencies encourage speculation. The FSA believes that the creation and sale of such tools should be taken seriously.

For how to judge whether the fund is mainly invested in crypto assets. The FSA believes that the fund's main investment "is the core asset managed in the operation of the project", but cannot be judged based on the percentage of total assets. Various factors should be considered, such as the degree of contribution to income and the attractiveness to investors.

The FSA said that investors including pension funds and regional financial institutions are not suitable for investing in funds with crypto assets.

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