Key Points
- Japan’s government has no plans to include Bitcoin in its foreign exchange reserves due to volatility concerns and lack of understanding.
- Under Japan’s legal system, cryptocurrencies do not fall under the category of foreign exchange assets.
The Japanese government has officially communicated to Senator Hamada that it will not be incorporating Bitcoin into its foreign exchange reserves. The reason cited for this decision is a lack of comprehension and worries about the cryptocurrency’s volatility.
The response was given on December 20 to several queries raised by Senator Satoshi Hamada regarding the inclusion of Bitcoin as part of Japan’s foreign exchange reserves. The statement, made in the name of Prime Minister Ishiba Shigeru, clarified that Japan currently has no plans to consider cryptocurrency reserves.
Senator Hamada’s Proposal and Government’s Response
Senator Hamada, a member of the Party to Protect the People from NHK, proposed that Japan should follow the lead of the United States and other countries looking into Bitcoin reserves. The government replied that it lacks sufficient knowledge about global trends in this area and stated that discussions on adopting cryptocurrencies for reserves are in very early stages. Therefore, it would be “difficult to express a view” on this subject at this time.
The response also highlighted that under Japan’s special account management legal system, cryptocurrencies like Bitcoin do not qualify as foreign exchange assets. Furthermore, a “crypto asset” is not considered a “security” under the Financial Instruments and Exchange Act as per Japanese law.
Regulations and Current Perspective
The Payment Services Act defines “crypto assets” and mandates any crypto-asset exchange service (CAES) provider to register with the Financial Services Agency. Operating a CAES without registration could result in criminal penalties, according to Anderson Mori & Tomotsune, a Japanese law firm.
The current foreign exchange reserves are meant to stabilize foreign currency-denominated assets and bond markets. The Japanese government has stressed the volatility of crypto assets as it aims to prioritize safety and liquidity.
In addition, Akihiko Ogino, the CEO of a Japanese investment bank, has proposed that Japan should introduce cryptocurrency exchange-traded funds. However, Daiwa Securities, which manages the Nikkei 225 ETF, has not revealed any plans for a crypto-backed ETF. The current stance of Japan towards crypto assets could potentially delay the ETF plans of Daiwa Securities.
