Japan’s Liberal Democratic Party submitted a proposal to the government requesting a legal framework for crypto-based exchange-traded funds and promotion of yen-denominated stablecoins, according to the party’s formal submission.
The proposal marks the ruling party’s most direct call yet for regulatory clarity on two crypto investment products that Japanese authorities have long approached with caution. The FSA has repeatedly expressed reservations about crypto funds, but the LDP’s intervention signals political momentum behind both asset classes.
“Crypto-ETFs would provide investors with easy-to-understand ways of investment,” the Liberal Democratic Party stated in the proposal. The party also called to “position the product as an official means of investment in the financial market.”
The FSA plans to amend the Investment Trust Act’s enforcement order to add cryptocurrencies to the list of specified assets for ETFs with stronger investor safeguards. Industry leaders expect Japan’s first wave of crypto ETFs could be approved and listed within two years, potentially as early as next year, though JPX CEO Hiromi Yamaji noted listings could come in 2028 if progress on law amendments stalls.
“We’re ready to work on it once legislation and tax treatment are made clear,” Yamaji said in an April interview with Bloomberg.
Stablecoin framework advances
Japan’s stablecoin framework was established through the 2022 amendment to the Payment Services Act, restricting issuance to licensed money transfer companies, trust companies, and banks. JPYC, a Tokyo fintech company, launched the first yen-pegged stablecoin last year.
In May, the FSA expanded its Cabinet Office Ordinance to recognize certain trust-type stablecoins issued by foreign trust banks as “electronic payment instruments” under the Payment Services Act. The revisions remove foreign trust-backed stablecoins from FIEA “securities” classification, effective June 1.
The FSA also endorsed a project by three major Japanese banks to jointly issue a yen-backed token, though the banks’ names were not disclosed.
Junichi Kanda, a lawmaker on the LDP’s blockchain panel, framed the stablecoin push in regional terms. “We urged the government to take steps to promote yen stablecoins for settlement in Asia in the future,” Kanda said.
Japan will host the Asian Development Bank’s annual meeting next year, which the LDP plans to use to promote yen stablecoins and blockchain innovation. The timing underscores the party’s strategy to position Japan as a crypto-forward jurisdiction in the region.
Earlier this year, authorities amended the FIEA to classify crypto assets as financial instruments and outlined compliance requirements for crypto use in real estate deals, broadening the regulatory perimeter beyond traditional stablecoins and ETFs.
Satsuki Katayama, Finance Minister and overseer of the FSA, will likely play a key role in translating the LDP’s proposal into regulatory action. The FSA’s track record suggests a methodical approach: the agency has spent years building the stablecoin framework and now appears willing to extend similar rigor to ETF safeguards.
