Japan's largest financial institutions are moving swiftly to bring cryptocurrency investment trusts to retail investors, marking a major change in how ordinary people in the country can gain exposure to digital assets. According to a report from Nikkei, SBI Securities and Rakuten Securities are already building their own products, while other heavyweights like Nomura Holdings, Daiwa Securities Group, and SMBC Group are preparing to follow suit once the regulatory framework is finalized by 2028.

The move comes as Japan's Financial Services Agency (FSA) works to amend the enforcement order of the Investment Trust Act, which would formally include cryptocurrencies among the list of assets that investment trusts can hold. This regulatory shift is expected to take effect in fiscal 2027, with full implementation by 2028. Last month, Japan reclassified crypto assets as financial instruments under the amended Financial Instruments and Exchange Act, bringing them under the same legal umbrella as stocks and bonds. This change streamlines oversight and removes ambiguity for both issuers and investors.

SBI Securities Leads the Charge

SBI Securities, part of the SBI Holdings group, is one of the most aggressive players in this new arena. The company plans to sell funds developed by its asset management subsidiary, SBI Global Asset Management. These products will span both exchange-traded funds (ETFs) and traditional investment trusts, focusing on highly liquid cryptocurrencies like Bitcoin and Ethereum. By handling development, distribution, and marketing entirely in-house, SBI aims to control costs and speed time-to-market.

The group has also signaled ambitions beyond simple single-asset funds. SBI Holdings previously announced plans for a Bitcoin-XRP dual ETF, as well as a hybrid gold-crypto ETF, pending regulatory approval. These innovative products could attract investors looking for diversified exposure within a single liquid instrument.

Rakuten Securities Targets Smartphone Investors

Rakuten Securities, a subsidiary of the e-commerce giant Rakuten, is taking a similar but more retail oriented approach. Working alongside Rakuten Investment Management, the company is designing products that can be traded directly through its smartphone app. This strategy capitalizes on Japan's high smartphone penetration and the growing preference for mobile-first financial services.

Rakuten already operates a crypto exchange, Rakuten Wallet, giving the group deep expertise in digital assets. Integrating crypto investment trusts into its existing securities platform will allow users to switch seamlessly between traditional assets and cryptocurrencies without opening a separate account.

Nomura and Daiwa Prepare for Entry

Nomura Holdings, Japan's largest brokerage, has officially announced plans to develop crypto investment trusts within its group. The company is expected to leverage its global expertise in ETFs and structured products to create offerings that meet institutional standards. Nomura has been involved in crypto through its subsidiary Laser Digital, which focuses on digital asset trading and venture investments.

Daiwa Securities Group has also stated its intention to enter the space, working on trust products that could be distributed through its extensive branch network. Both Nomura and Daiwa are waiting for the final regulatory changes before launching their products.

SMBC Group, which includes SMBC Nikko Securities, has formed a cross-group task force to evaluate potential products and strategize on market entry. Asset Management One, under Mizuho Financial Group, has begun preliminary exploration, though no concrete timeline has been announced.

Regulatory Evolution Opens the Door

Japan has long been a cautious but forward-thinking environment for crypto regulation. The country was one of the first to recognize Bitcoin as legal property in 2017 and to require exchange registration under the Payment Services Act. However, investment trusts holding cryptocurrencies were prohibited because the Investment Trust Act did not list crypto as an eligible asset. The current amendment process, which will add crypto to that list, is a critical step.

In addition, the reclassification of crypto as financial instruments under the Financial Instruments and Exchange Act means that issuers must comply with strict disclosure and conduct rules similar to those for securities brokers. This includes anti-money laundering (AML) checks, risk warnings, and suitability requirements. The FSA is also tightening AML rules on real estate and crypto transactions, ensuring that the new products meet global standards.

Lowering Barriers for Retail Investors

Currently, Japanese retail investors who want to buy cryptocurrencies must open an account with a dedicated exchange like bitFlyer, Coincheck, or Rakuten Wallet. This requires a separate registration process, often with its own identity verification and funding steps. Investment trusts, on the other hand, can be purchased through a standard securities account that many investors already have.

By offering crypto exposure within familiar brokerage interfaces, these new products could significantly increase retail participation. The convenience of buying and selling through existing accounts, combined with the professional management of trust funds, may attract conservative investors who have been hesitant to navigate crypto exchanges.

Moreover, investment trusts typically have lower minimum investment amounts and can be purchased in small increments, making them accessible to a wider audience. This aligns with Japan's long history of promoting household savings and investment through tax-advantaged NISA accounts, although it remains to be seen whether crypto trusts will qualify for such programs.

Broader Implications for the Japanese Market

The entry of major brokerages into crypto investment trusts signals a growing acceptance of digital assets within Japan's mainstream financial ecosystem. It also reflects a global trend where traditional asset managers are embracing cryptocurrencies after the approval of spot Bitcoin ETFs in the United States in early 2024 and in Hong Kong and other jurisdictions. Japan, despite its early regulatory leadership, has been slower to allow crypto ETFs, but the upcoming changes are expected to bring the country in line with international peers.

The development could also spur innovation in other areas. For example, SBI's plan to offer a dual Bitcoin-XRP ETF could differentiate Japan from markets that only offer single-asset products. Similarly, the gold-crypto hybrid ETF might appeal to investors seeking a store of value with both traditional and digital components.

On the other hand, competition among these large groups will likely lead to fee compression, benefiting retail investors. Rakuten's smartphone-first strategy may force others to improve their digital offerings, accelerating the digitization of Japan's brokerage industry.

Risk and Oversight Considerations

While the potential for growth is substantial, regulators and issuers must address several risks. Cryptocurrencies are known for high volatility, and investment trusts that hold them will reflect those price swings. Proper risk disclosures and investor education will be essential to prevent misunderstandings. The FSA is likely to impose leverage limits and require clear warnings in all marketing materials.

Additionally, custody of digital assets remains a complex issue. Trust banks or qualified custodians will need to hold private keys securely, and any security breach could lead to significant losses. Japanese firms like SBI and Nomura have already invested in custody infrastructure through partnerships with companies like Komainu and by building internal solutions.

Another concern is market manipulation and insider trading. Since crypto markets are less regulated than traditional stock exchanges, ensuring fair pricing for trust units is challenging. The FSA may require these trusts to use regulated exchanges or rely on index providers that meet specific standards.

Timeline to 2028: A Shift in Japanese Finance

The full rollout of crypto investment trusts is expected to occur in phases. The legislative changes to the Investment Trust Act are anticipated in the current parliamentary session, with the law taking effect in fiscal 2027. By 2028, the enforcement order will be finalized, allowing issuers to register their products. In the meantime, companies like SBI and Rakuten are building their products in preparation.

Separately, Japan is also considering allowing spot crypto ETFs, which would trade on stock exchanges like the Tokyo Stock Exchange. These products could become available around the same time, with Nomura and SBI already positioning themselves as early entrants. The combination of investment trusts and ETFs would give Japanese investors multiple channels to access digital assets.

The impact on the broader crypto ecosystem could be significant. Japan is the third-largest economy in the world, and its retail investor base has historically been active in commodities and foreign exchange. Success in Japan may also encourage other Asian countries, such as South Korea and Singapore, to adopt similar frameworks.

Source: Cointelegraph News