First Crypto Fund in Japan Targets Long-Term Retail Investors

Japanese financial conglomerate SBI Holdings Inc. is aiming to launch the country’s first cryptocurrency fund by the end of November that can give individual investors a way to diversify their broader portfolio.

The fund could grow to several hundred million dollars invested in coins including Bitcoin, Ethereum, XRP, Bitcoin Cash, Litecoin and possibly others, said Tomoya Asakura, who oversees asset management for Japan’s biggest online brokerage. Investors may need to put in a minimum of roughly 1 million yen ($9,100) to 3 million yen and it will mainly be aimed at people who understand risks associated with cryptocurrencies, such as the big price swings, he said.

“I want people to hold it together with other assets and experience firsthand how useful it can be for diversifying portfolios,” said Asakura, president of SBI affiliate Morningstar Japan K.K., in an recent interview. “If our first fund goes very well, we’d like to move quickly” to make a second one, he said. 

Despite tougher regulations for cryptocurrency businesses than in many other countries, digital assets are growing in popularity in Japan. COINBASE Global Inc., the U.S.’s largest cryptocurrency exchange, recently started a local trading platform and cryptocurrency transactions for the first half of 2021 more than doubled to 77 trillion yen from a year earlier, data from an exchange association shows. 

It has taken SBI four years to get the fund off the ground, in part due to tighter regulations in response to hacking and other domestic scandals that forced changes from its early plans. The Financial Services Agency, the regulator, banned companies from selling cryptocurrencies through investment trusts, a popular way of investing in Japan that SBI initially sought to use. Instead, the brokerage decided on a vehicle known as an “anonymous partnership.”

“There is an overwhelming perception that cryptocurrencies are highly volatile and speculative,” Asakura said. His job is building a “track record” showing the public and regulators that investors get a more resilient portfolio by adding cryptocurrencies because they often move inversely to stocks and other traditional investments, he said. 

Cryptocurrency funds can be a “satellite” asset in a portfolio, as opposed to those considered to be “core,” that will help boost overall returns, Asakura said, without giving an expected level of return for the portfolio. SBI is open to making another fund designed specifically for institutional investors if there is enough demand, he added. 

“Once people feel it firsthand,” he said, “they will understand that we aren’t recommending cryptocurrencies as a tool of speculation.”