According to a recent Bloomberg report reportJapan’s top financial regulator is pumping the brakes on approving crypto-based exchange-traded funds (ETFs), taking a more conservative stance than regulators in some other countries.

Crypto ETF Expansion Faces Headwinds in Japan

Hideki Ito, commissioner of Japan’s Financial Services Agency (FSA), stressed the need for “cautious considerations” in greenlighting crypto-linked ETFs in the country. Ito expressed concern that crypto assets “do not necessarily contribute to the wealth creation of the Japanese people in a stable and long-term manner.”

Hideki Ito’s comments come as global regulators weigh in on their stance on ETFs that invest directly in cryptocurrencies, such as Bitcoin (BTC) and Ethereum (ETH).

Earlier this year, the US Securities and Exchange Commission approved the first spot Bitcoin ETFs, after a lengthy legal battle with asset manager Grayscale.

Similar crypto ETFs have recently launched in markets such as Hong Kong, Australia and the United Kingdom, following the successful trading of these products in the US. These exchange-traded funds have attracted substantial net inflows, amounting to $19.2 billion.

Japan, however, appears intent on taking a more measured approach. Ito, a career bureaucrat who took over as FSA commissioner in July, said the agency wants to maintain a “pro-technology stance” but has reservations about encouraging broad retail investment in crypto assets.

Scars from previous failed stock exchanges

Bloomberg notes that the FSA’s caution is rooted in Japan’s troubled history with cryptocurrency exchanges and hacks. Customers of the now-defunct Mt. Gox exchange are still working to recover tokens lost in a major breach more than a decade ago.

In addition, in June this year, the DMM Bitcoin exchange, one of the largest in the Asian country, $305 million lost According to security firm Chainalysis, this was the seventh-largest digital asset theft ever.

Against that backdrop, the FSA appears set to move slowly and cautiously when it comes to approving crypto-linked ETFs that would open the door to broader mainstream investmentIto acknowledged that the regulator will not completely rule out the possibility, but he stressed that further consultation is needed.

At the time of writing, the largest cryptocurrency in the market, Bitcoin, has managed to rebound above $58,330 after hitting a seven-month low on Monday amid global economic uncertainties.

This comes as US ETFs linked to BTC have provided significant support to the price, with fresh inflows on Wednesday’s trading day. According to According to Bloomberg ETF expert Eric Balchunas, after a few days of “mild outflows,” these ETFs saw net inflows of $45 million on August 7.

However, the most important aspect regarding the recorded inflows is that these index funds, with the exception of Grayscale’s Bitcoin Trust (GBTC), recorded no outflows. This shows that institutions have confidence in the long-term prospects of cryptocurrencies.

Main image of DALL-E, chart from TradingView.com