Japan’s Financial Services Agency (FSA) may approve exchange-traded funds (ETFs) that track cryptocurrencies, says Bloomberg (Jan 8).

However, FSA has instead shelved earlier plans to approve crypto-based derivatives, citing unresolved concerns that such products might lead to little benefit outside of fanning speculation.

Bloomberg reported that FSA’s decision to block instruments like Bitcoin futures or Ethereum options in Japan, one of the largest markets for cryptocurrencies, is another blow to investors hoping institutional demand could stem a long, harsh sell-off.

The silver lining is that if Japan approves ETFs tracking digital assets, this could help revive retail investment appetite since Coincheck Inc. had $500 million stolen a year ago.

Within the next 2 months, Japan’s Liberal Democratic Party will likely submit draft legislation to its Diet, according to Bloomberg’s unnamed source close to the matter. That draft is expected to take into account factors such as FSA’s positions on ETFs, crypto-based derivatives, and its failure to prevent the Coincheck hack.

Such amendments to securities legislation, which could include cementing approval for ETFs, may be set into law in the next 2 years.

Bloomberg believes ETFs remain “the holy grail” for many in the crypto industry hoping ETFs could make crypto investments more legitimate to traditional investors, especially those with a brokerage account.

However, the Securities and Exchange Commission (SEC) in the US is still far less approving. Last August, SEC rejected Bitcoin ETF proposals from ProShares, Direxion, and GraniteShares “to prevent fraudulent and manipulative acts and practices”. SEC also postponed a decision on a product from VanEck/SolidX until February, reported CoinDesk.