Cryptocurrency ETFs

[IloveJapan]

Hello everyone, hope you are all doing fine.

I am looking for a broker that would enable me to trade crypto ETFs in a Japanese Tokukei Koza account.
I’ve done some searching for these ETFs on the Internet. So far I have discovered that Canada is greatly ahead of other countries, with its newly-listed ETFs for Bitcoin, etherium and possibly ripple? I also have the impression some European countries have a few ETFs too, though I don’t know where yet. Also I don’t know about London.
So I am likely to need a Japan-based broker that offers trading of those countries’ markets/ETFs.

So I would like to ask you all:
1) Does anybody know of such brokers?
2) What other countries offer such crypto ETFs?

I look forward to hearing from you!

[Ax6isB]

Fidelity Brokerage registered in March to launch a bitcoin ETF. Not sure when it will happen.

Just saw this pop today, an INVERSE bitcoin ETF for those that think it’s going down - BITI ETF

[IloveJapan]

Hello again, has everyone had a good Golden Week? Thank you for the two replies.

I’ve continued scouring the Net to see what ETFs I might be able to access from Japan. The most ideal thing would be for a Japan-based brokerage to be able to offer such ETFs. The reason I want ETFs is that purchasing cryptocurrencies directly would mean:
1) any gains would be general/miscellaneous income in tax terms
2) very high commissions compared to trading etfs (though I don’t know the latest, and haven’t yet compared different rates by service provider)
3) risk of fraud. I read somewhere that globally, about 15% of cryptocurrency gets stolen.

Apparently, the tax authorities in Japan have not yet formed a policy on how to treat taxpayers if their crypto gets stolen.

Part of me is also wondering if it would be a good idea to open an account at Interactive Brokers to access such ETFs? Or maybe IG or Philip Securities (names?). If I chose to open such an account then how would the situation be regarding:
1) Customer service - are they helpful or accessible when needed?
2) IB seems to have a Japanese branch too, so would this be a domestic account or a foreign account?
3) Can you use yen to trade, or would you have to use dollars?

I think for foreign ETFs too it is possible to opt for 申告分離課税, but I will have to confirm this with the tax office first.

[RMA]

Hello again, has everyone had a good Golden Week? Thank you for the two replies.

I’ve continued scouring the Net to see what ETFs I might be able to access from Japan. The most ideal thing would be for a Japan-based brokerage to be able to offer such ETFs. The reason I want ETFs is that purchasing cryptocurrencies directly would mean:
1) any gains would be general/miscellaneous income in tax terms
2) very high commissions compared to trading etfs (though I don’t know the latest, and haven’t yet compared different rates by service provider)
3) risk of fraud. I read somewhere that globally, about 15% of cryptocurrency gets stolen.

Apparently, the tax authorities in Japan have not yet formed a policy on how to treat taxpayers if their crypto gets stolen.

Part of me is also wondering if it would be a good idea to open an account at Interactive Brokers to access such ETFs? Or maybe IG or Philip Securities (names?). If I chose to open such an account then how would the situation be regarding:
1) Customer service - are they helpful or accessible when needed?
2) IB seems to have a Japanese branch too, so would this be a domestic account or a foreign account?
3) Can you use yen to trade, or would you have to use dollars?

I think for foreign ETFs too it is possible to opt for 申告分離課税, but I will have to confirm this with the tax office first.

I don't see any reason to buy foreign ETFs for cryptocurrencies when you can easily buy real crypto in Japan.

1) In my opinion the gains in tax terms won't matter much whether you buy real crypto or ETFs (but I am no tax expert). I think you can leave that concern aside.

2) Japanese exchanges are tricky, they give you two options - buying on exchange or buying at spot. Spreads on spot prices are ridiculous but spreads on exchange are negligible.Commissions are hardly anything on Japanese exchanges (if you know how and from where to buy) Actually they will pay you market maker commission if you put limit order. I would recommend opening an account with bitbank (there are only few cryptocurrency options available in Japan and bitbank has maximum of them on their exchange) and buy using limit orders on exchange, not spot purchases.

3) I have bought ledger nano wallet and I keep all my cryptocurrencies on that. Very safe and easy to transfer. Even if I move my residence from Japan to some other country I don't have to sell and can easily take my crypto with me.

I believe you're thinking too much. If you want crypto exposure, just buy real crypto from any of Japan exchanges. You can either leave them on exchange as they are pretty much safe here (when there was hack with coincheck and zaif exchange in the past, both the times customers were paid in full) but if you are still worried then you can buy a hard wallet and store your crypto there.

I have been involved in cryptocurrencies since November 2017 and I can tell you that they are the future, very user friendly and very easy to handle. Nobody knows whether bitcoin or any other current cryptocurrency will lead in future or not or any new cryptocurrency will take over, but I am pretty much sure that the future of currencies will be digital currencies.

Before starting, educate yourself with basic online safety like how to use password managers, how to store cryptos etc. and start with little money.

[adamu]

1) any gains would be general/miscellaneous income in tax first.

1) In my opinion the gains in tax terms won't matter much whether you buy real crypto or ETFs (but I am no tax expert). I think you can leave that concern aside.

IloveJapan is right to be concerned here.

Gains on crypto are treated as miscellaneous income, which will get lumped into your total income figure and be taxed at whatever band you're in, also potentially increasing your tax band and the total tax you pay on all your income. It will also affect your residence tax. So up to 55%.

An ETF will pay the standard 20% captial gains without affecting your other income, as far as I understand.

You can also offset ETF losses against other share profits, but you can't do that with crypto.

[RetireJapan]

And if your income is purely from investments then how are you taxed on crypto?

It would be regular income as I understand it.

[IloveJapan]

Thank you for your feedback and advice RMA. Greatly appreciated.

I have a different view from you on taxes, but that is what debates are all about. All the websites I have read underline taxes of up to 55%. I imagine that over the very long term the rules will change, but given that we are in the middle of the coronavirus crisis I doubt if that will happen anytime soon.

Can I ask, when you say “buy on commission” what does that mean? Sorry if the question is ignorant. And is it a gold wallet you are using?

I haven’t invested in crypto currencies.

I’m also wondering: I keep reading that some of these currencies have only a finite supply, which favors their supply/ demand conditions, but at the same time l also think that can’t the people in charge or the creators elect to raise the supply whenever they want, which would have an unknown effect on the price?

[RMA]

Thank you for your feedback and advice RMA. Greatly appreciated.

I have a different view from you on taxes, but that is what debates are all about. All the websites I have read underline taxes of up to 55%. I imagine that over the very long term the rules will change, but given that we are in the middle of the coronavirus crisis I doubt if that will happen anytime soon.

Can I ask, when you say “buy on commission” what does that mean? Sorry if the question is ignorant. And is it a gold wallet you are using?

I haven’t invested in crypto currencies.

I’m also wondering: I keep reading that some of these currencies have only a finite supply, which favors their supply/ demand conditions, but at the same time l also think that can’t the people in charge or the creators elect to raise the supply whenever they want, which would have an unknown effect on the price?

I am not worried about the taxes at the moment as I am in for the long term. At present Japan treats crypto gains as misc. income which can be taxed maximum UPTO 55% (45% income tax + 10% local inhabitant’s tax) if you are in very high income bracket (i.e. taxable income is more than JPY 40 million). Many countries treat crypto gains as capital gains so in future Japan may fall in line. They will eventually have to treat bitcoin as a currency or an asset and recently most of the countries are reluctant to treat it as currency and prefer calling it an asset. However I am no tax expert so don't take my word for it.

I didn't say "buy on commission", I said "buy on exchange" and not on "spot". Bitbank / Bitflyer have 2 ways of buying bitcoin, either at spot prices or on exchange. For example, bitcoin real time price right now is around 3950000 so if I buy it on spot market on Bitbank then I have to pay 4010000 and if I sell it then I will get 3890000 so the spread between buying and selling is 3% that means I have to wait for price to rise at least 3% to break even. However I can buy it on their exchange at the real time price, i.e., 3950000. The commissions are 0.12% if I put "market order" and -0.02% if I put "limit order".

I don't want to scare you by going much in details and anyway it won't matter much in the long run if you don't plan to trade too often.

If you are interested mainly in bitcoin then go with bitflyer (as their website and app are all english) but if you are interested in other currencies available in Japan and don't want to pay high spreads then go with bitbank (their website and app is in Japanese and you will need little time to get used to it). I suggest you to open the account with both these exchanges, get used to them and then decide which one to use.

As for the wallet, I am using ledger nano s (https://shop.ledger.com/products/ledger-nano-s) to store my crypto.

The beauty of bitcoin is it has hard cap of 21 million and there is no one in charge who can raise it's supply. High net worth people are running out of options where to diversify so bitcoin is the obvious next choice. Ethereum is also very interesting so you should study it more. I am currently 70% bitcoin and 30% ethereum.

Lastly I would suggest, don't look for ETF's when you can still easily own the real crypto in Japan.

EDIT: You can buy even JPY 1,000 worth of bitcoin so open an account with exchange, buy small amount, transfer it to your wallet. If everything goes smooth then you can put more money. Trust me it's much easier than it seems.

[captainspoke]

No comment on any of the above, but given what china has done, among other factors, good luck to those holding one or another form of this.

[TJKansai]

High net worth people are running out of options where to diversify so bitcoin is the obvious next choice. Ethereum is also very interesting so you should study it more. I am currently 70% bitcoin and 30% ethereum.

Lastly I would suggest, don't look for ETF's when you can still easily own the real crypto in Japan.

I have a Bitflyer account and I would agree it is pretty user-friendly.

I have dabbled in Bitcoin and Ether, but after being up 20% a month ago I am now down 5%. Happy it is just a small amount. I think ETH has more potential if they move to the proof of stake model, but don't take my advice, I am a novice.

The rollercoaster ride of Bitcoin and other crypto is not for the faint of heart. Most listed companies are a lot more stable. I imagine penny stocks behave like bitcoin (or Dogecoin/Shiba Inu), where a single comment by one person (Musk) can send them flying or crashing.

I would disagree that wealthy people are running out of ways to diversify. Sure, crypto is new, but any new company or real estate project is another opportunity. People with foresight may have put money on commodities, which are now in high demand. Plenty of choices.