Japan’s Financial Services Agency (FSA) is scrapping a reform that would allow banks to acquire and hold digital assets like Bitcoin for investment purposes, according to a Japanese newspaper Yomiuri reports.
The system will allow banks to trade cryptocurrencies in the same way as stocks and government bonds, while enforcing certain regulations to ensure their financial stability.
The FSA is also considering registering banking groups as “cryptocurrency exchange operators,” enabling them to offer trading and exchange services, a move aimed at easing the investment process by involving credible banking groups.
The upcoming meeting of the Working Group of the Financial Services Council, an advisory body to the Prime Minister, is scheduled to discuss the new reform.
The plan is in line with the growing adoption of digital assets around the world, including in the US and marks a move from the 2020 guidance that prohibits local banks from acquiring cryptocurrencies for investment purposes.
Japan’s growing openness to cryptocurrencies comes at a critical time as the country takes on an extremely high debt-to-GDP ratio of 240%.
This unsustainable level of debt is expected to prompt financial repression measures, such as low interest rates, high inflation and increased regulation, to manage the debt burden. In this context, cryptocurrencies can appear as attractive escape valves for investors looking for alternatives to traditional financial systems.
