[Digital Today reporter Jinju Hong (홍진주)] A spot XRP ETF could lead to a surge of money from pension funds and financial institutions and drive expansion in the XRP market if it is approved in Japan, an outlook said.

On May 25, blockchain media outlet The Crypto Basic reported that Japan’s regulatory overhaul and the spread of XRP could combine to stimulate institutional demand across Asia.

The analysis was issued by XRPL-based media platform Reflexivity. Reflexivity focused on Japan as the world’s fourth-largest economy, with gross domestic product of $4.4 trillion, and a market where financial regulation is run conservatively. If Japan approves a spot XRP ETF, it could become a turning point for Asian financial institutions to accept XRP more as an institutional investment asset, it said.

Demand for XRP in Japan was also cited as a positive backdrop. A Bitget report showed the most popular cryptocurrencies among Japanese investors were bitcoin (BTC), ether (ETH) and XRP, and the three assets accounted for more than 75 percent of trading volume on licensed exchanges in Japan. With XRP already established as a key cryptocurrency in the local market, the analysis said an ETF launch could link it to an institutional product.

The regulatory environment is also changing at a faster pace. Japan’s cabinet in April approved a bill to amend the Financial Instruments and Exchange Act to reclassify 105 cryptocurrencies, including XRP, bitcoin and ether, as financial products rather than means of payment. If enacted, disclosure obligations, insider trading restrictions and penalty provisions are expected to be strengthened to the level applied to existing financial products. Implementation is expected in fiscal 2027.

Japan’s Financial Services Agency is also reviewing a plan to allow cryptocurrency products under the Investment Trust Act. If this becomes reality, it would make Japan’s first spot cryptocurrency ETF possible. The market currently cites fiscal 2028 as the earliest likely approval timing, though some raise the possibility of an early launch in 2027.

The market is paying particular attention to the possibility of pension fund inflows. Japanese pension funds manage more than $3 trillion in assets, but current regulation places significant constraints on direct cryptocurrency investment. Reflexivity said an ETF could provide institutions with a legal, regulated investment route. Using an ETF structure would allow institutions to gain exposure to XRP’s price without holding tokens directly, the analysis said, raising the likelihood of participation by pension funds, insurers, mutual funds and family offices.

Distribution networks at large Japanese financial platforms were also cited as a variable. Reflexivity forecast that if regulators approve it, financial platforms such as Rakuten Wallet, Mitsubishi UFJ and SBI Securities could offer a spot XRP ETF to customers. The potential user base of these platforms is estimated at more than 100 million. An outlook also said Japan’s regulatory changes could affect major Asian financial markets including South Korea, Singapore and Hong Kong.

In the local business landscape, attention is on moves by SBI Holdings. SBI Holdings has expanded businesses using XRP since 2019, and has also run a bond programme worth 10 billion yen that provides investors with XRP as a reward. SBI Ripple Asia is also operating an XRP Ledger-based token issuance platform under Japan’s Payment Services Act.

Work to prepare actual products is also under way. SBI Holdings last August applied to the Financial Services Agency for a product, in the form of an instrument listed on the Tokyo Stock Exchange, with a structure investing in spot bitcoin and spot XRP. The company set a target of reaching 5 trillion yen, about $32 billion, in assets under management within three years of launch.

Japan has not officially approved a spot XRP ETF so far. Still, as reclassification of cryptocurrency financial products, efforts to overhaul the Investment Trust Act and SBI Holdings’ product preparations proceed at the same time, it is becoming increasingly clear in the market that Japan is gradually moving toward introducing an XRP ETF.