Japan’s Crypto Exchanges Push for 10 Times Leverage on Margin Trading: Bloomberg

Japan's cryptocurrency exchanges are urging regulators to relax margin trading restrictions on popular cryptocurrencies such as bitcoin (BTC).

Exchanges in the country once offered leverage of up to 25 times principal capital, and trading volumes reached as high as $500 billion annually in 2020 and 2021, according to Bloomberg.

In early 2022, however, Japanese regulators limited crypto exchanges to offering leverage of only twice the principal capital, which led to trading volumes dropping drastically last year.

The Japan Virtual and Crypto Assets Exchange Association (JVCEA), a self-regulated body of local exchanges, is now arguing that these restrictions hinder market growth and discourage 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 told Bloomberg in an interview that reforming the leverage rule could make Japan “more attractive for crypto and blockchain companies” and encourage more trading.

The 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.

Japanese crypto exchanges processed just over $110 million worth of trading volumes in the past 24 hours, data shows. Most volume was generated on bitcoin (BTC), ether (ETH) and xrp (XRP) trading, the data shows.

JVCEA’s comments come as Japan warms up to crypto regulation and stablecoin usage. Lawmakers are said to be 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.