Japan Considers Easing Crypto Margin Trading Restrictions to Boost Industry

While Western regulators have been tightening their grip on cryptocurrencies, Asian regulators, particularly in Japan, are exploring crypto-friendly rules to attract more companies. In an effort to accommodate industry players, Japanese regulators are planning to relax restrictions on margin trading. This move, if implemented, could make Japan more attractive to crypto and blockchain firms, according to the Japan Virtual & Crypto Assets Exchange Association. The country’s financial regulator, the Financial Services Agency (FSA), is engaged in discussions with local exchanges to reach consensus on recommended leverage limits.

Japanese regulators are considering easing restrictions on margin trading in a bid to foster a more crypto-friendly environment. The Japan Crypto & Virtual Asset Exchange Association revealed that industry players are seeking to allow leverage for retail investors at levels ranging from four to ten times. Currently, clients in Japan can only double their exposure through loans.

Genki Oda, Deputy Chair of the association, highlighted the potential benefits of reforming the leverage rules, stating that it could make Japan a more attractive destination for crypto and blockchain companies. Oda believes this step will also encourage increased trading activity in the market.

Local crypto exchanges in Japan are already in discussions to come to a consensus on the proposed leverage limits. The exchange is expected to present their proposal to the Financial Services Agency (FSA), the country’s main financial regulator. The FSA has expressed a willingness to engage in discussions with digital asset businesses regarding the relaxation of limits on margin trading, provided there is strong justification that is in line with the government’s goal of expanding blockchain-related sectors.

This development has coincided with Hong Kong’s attempts to position itself as a crypto hub in Asia, prompting Japan to consider relaxing some of its own crypto rules, including token registers and tax regulations.

Previously, cryptocurrency platforms in Japan allowed trading with leverage of up to 25 times, resulting in significant margin trading volume reaching around $500 billion in 2020 and 2021. However, after the FSA imposed a double leverage limit, trading volumes plummeted by 75% in 2022. This measure aims to curb excessive speculation and protect investors from significant losses.

In other parts of the world, the availability of spot margin trading on digital asset exchanges varies based on local regulations. Typically, these platforms offer leverage between five and ten times the initial deposit. Some platforms even provide more aggressive lending options, reflecting the high-risk speculation that can create waves of greed and fear within the crypto market.

Oda emphasized that the volatility of the crypto market has eased over the past few years, and that local Japanese crypto exchanges are well prepared to help investors manage the risks associated with margin trading.

Japan is considering easing restrictions on crypto margin trading to attract more companies and boost the industry’s growth. Such a move could make the country more attractive to crypto and blockchain companies, as well as boost trade activity. The Financial Services Agency engages in discussions with local exchanges to determine appropriate leverage limits. This development comes as Japan seeks to maintain its position in the evolving cryptocurrency regulatory landscape and cultivate a favorable environment for digital asset businesses.