Japan’s Crypto Exchanges Propose 10x Leverage on Margin Trading

• The Japan Virtual and Crypto Assets Exchange Association proposes permitted leverage of 4 to 10 times for retail players.
• Current margin trading caps in Japan limit leverage to 2 times.
• The Financial Services Agency requires convincing reasons for loosening the caps.

Japan’s cryptocurrency exchanges are advocating for more lenient margin trading regulations as the country aims to boost its position in the global digital asset market. The Japan Virtual and Crypto Assets Exchange Association (JVCEA) has proposed permitted leverage for retail players of four to ten times, compared to the current limit of two times.

According to a recent report from Bloomberg, industry stakeholders are seeking to ease the current restrictions on margin trading. In an interview, Genki Oda, the Vice Chairman of JVCEA, disclosed that negotiations are currently taking place to establish a suitable leverage limit, which they plan to present to the Financial Services Agency (FSA) within the next month. He added:

Reforming the leverage rule could make Japan more attractive for crypto and blockchain companies.

The current margin trading caps in Japan have been a point of contention among crypto exchanges. These caps limit the amount of leverage that traders can use.

At present, Japan’s FSA imposes a 2-to-1 leverage limit. This means that investors can only borrow up to twice their initial investment when trading digital assets. The proposal by the JVCEA seeks to increase this limit between 4-to-1 and 10-to-1, which would allow traders to borrow from 4 up to 10 times their initial investment.

The push for looser margin trading rules comes as Japan seeks to establish itself as the crypto hub of Asia. Notably, Japan was one of the first to recognize Bitcoin as a legal form of payment in 2017. However, in recent years, the country has faced increased competition from other nations, such as Hong Kong and Dubai, which have adopted more progressive regulatory frameworks for digital assets.

This move by the association aims to boost trading volumes and attract more investors to the crypto market. Meanwhile, the country’s FSA has been cautious in regulating the market to prevent fraud and protect investors.

The response from the FSA to the proposed changes is yet to be seen. An FSA official stated that crypto firms must provide compelling reasons why loosening margin trading caps would assist the government in achieving its objective of expanding blockchain-based industries.