Japanese cryptocurrency exchanges are calling on regulators to loosen margin trading restrictions on popular digital assets such as Bitcoin (BTC). In 2020 and 2021, exchanges in the country offered leverage of up to 25 times the principal capital, resulting in trading volumes reaching as high as $500 billion annually. However, in early 2022, Japanese regulators limited crypto exchanges to offering leverage of only twice the principal capital, leading to a sharp decline in trading volumes.
The Japan Virtual and Crypto Assets Exchange Association (JVCEA), a self-regulated body of local exchanges, is now arguing that these restrictions are hindering market growth and discouraging new participants. Among the body’s demands is a request for higher leverage limits of at least 10 times the principal. JVCEA Vice Chairman Genki Oda stated that reforming the leverage rule could make Japan “more attractive for crypto and blockchain companies” and encourage more trading.
Regulators are expected to evaluate the proposals, taking into account market risks and investor protection. Any revisions to margin trading caps will undergo thorough reviews and consultations with industry participants. The push for revised margin trading caps aims to attract diverse traders, including institutional investors, while enhancing market liquidity. Allowing higher leverage would also enable traders to manage their positions more effectively, JVCEA said.
Data shows that Japanese crypto exchanges processed just over $110 million worth of trading volumes in the past 24 hours. Most volume was generated on Bitcoin (BTC), Ether (ETH) and XRP (XRP) trading.
As Japan warms up to crypto regulation and stablecoin usage, JVCEA’s comments come at an opportune time. Lawmakers are exploring Web3 regulations to support the growth of NFT and virtual lands-related businesses in the country, while local banks are working on plans to issue their own stablecoins – tokens pegged to a fiat currency such as the Japanese yen – in the coming months.