Japan Aims for Crypto Expansion with Revised Margin Trading Rules

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Key takeaways:

  • To increase market liquidity and draw in a variety of traders, revised margin trading caps are being pushed.
  • The regulators are anticipated to assess the suggestions while considering investor protection and market risk.

Japanese cryptocurrency exchanges are pleading with regulators to ease limitations on popular cryptocurrencies like bitcoin (BTC) regarding margin trading.

Regulators in Japan are currently preparing to loosen restrictions on margin trading. According to Bloomberg report, trading volumes in the country topped $500 billion annually in 2020 and 2021, and exchanges formerly offered leverage of up to 25 times original capital.

However, Japanese regulations restricted cryptocurrency exchanges from providing leverage greater than twice the principal capital starting in early 2022, which caused a sharp decline in trading volumes in 2017.

According to the Japan Virtual and Crypto Assets Exchange Association (JVCEA), a self-regulatory group of regional exchanges, these limitations impede market expansion and deter new participation. The body calls for increased leverage limits of at least ten times the principal. Customers can only borrow extra money at this time to double their risk.

In an interview with Bloomberg, Genki Oda, vice chairman of the JVCEA, said that changing the leverage rule may make Japan “more attractive for cryptocurrency and blockchain companies” and promote more trading.

The regulators are anticipated to assess the suggestions while considering investor protection and market risk. Margin trading caps will be thoroughly reviewed before any changes are made, and industry participants will be consulted.

Revisions to margin trading caps are being pushed to draw in various traders, including institutional investors, while boosting market liquidity. According to JVCEA, additional leverage would enable traders to manage their holdings more skillfully.

Japanese local crypto exchanges are already negotiating a consensus on the suggested leverage ceiling. They will probably submit their idea to the Financial Services Agency (FSA), the top banking regulator.

According to an FSA representative, cryptocurrency companies must offer convincing arguments for lowering margin trading limitations, consistent with the government’s goal of developing blockchain-related industries. The FSA is open to talking about this with companies that deal in digital assets.

According to data, Japanese cryptocurrency exchanges processed trades totaling a little over $110 million on the last day. The data reveals that trade in Bitcoin, Ether, and XRP generated the most volume.

While the West has begun a vigorous campaign against cryptocurrencies, officials in Asia have been working to enact crypto-friendly regulations to allow more businesses to enter the industry. Both Coinbase and Binance have been targeted by US authorities, which has resulted in continuing legal disputes between the two exchanges. Bybit is one of the businesses that has announced its exit from Canada, citing regulatory changes as their reason.

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