Japan Eyes Crypto Push With Loser Margin Trading Rules

While the West has initiated a heavy crackdown on cryptocurrencies, regulators in Asia have been trying to bring crypto-friendly rules to accommodate more firms in the market. Japanese regulators are now planning for a relaxation of curbs on margin trading.

As per the Japan Virtual & Crypto Assets Exchange Association, industry players want to permit leverage for retail players of four to ten times. However, at present, customers can only double their exposure via borrowing.

The association’s Vice Chairman Genki Oda said in an interview: “Reforming the leverage rule could make Japan more attractive for crypto and blockchain companies”. He also said that such a step would encourage more trading in the market.

Japan’s FSA In Discussion With Local Exchanges

The local crypto exchanges of Japan are already in talks to reach a consensus on the recommended leverage limit. They are likely to take their proposal further to the top financial regulator – Financial Services Agency (FSA).

According to an official from the Financial Services Agency (FSA), cryptocurrency companies are required to provide strong justifications for relaxing margin trading limits, which align with the government’s objective of expanding blockchain-related sectors. The FSA is willing to engage in discussions with digital asset businesses regarding this matter.

This development comes just at a time when Hong Kong is making a greater push towards establishing itself as the crypto hub of Asia. Thus, Japan is also mulling to ease some of its crypto rules on token listing and taxation.

In Japan, cryptocurrency platforms used to allow trading with leverage up to 25 times, which led to high volumes of margin trading reaching around $500 billion in 2020 and 2021. However, the volumes significantly decreased by 75% in 2022 after the Financial Services Agency (FSA) implemented a limit of two times leverage. This measure aimed to reduce excessive speculation and protect investors from substantial 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, which reflects the risky speculation that can create waves of greed and fear within the crypto market.

Oda said that crypto volatility has called down over the last three years and Japan’s local crypto exchanges are well-equipped to help investors manage risks with margin trading.