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Japan Considers Easing Curbs on Crypto Margin Trading 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 firms. In a bid to accommodate industry players, Japanese regulators are planning to relax curbs on margin trading. This move, if implemented, could make Japan more attractive for crypto and blockchain companies, according to the Japan Virtual & Crypto Assets Exchange Association. The country’s financial regulator, the Financial Services Agency (FSA), is engaging in discussions with local exchanges to reach a consensus on the recommended leverage limit.

Japanese regulators are contemplating the relaxation of curbs on margin trading in a bid to foster a more crypto-friendly environment. The Japan Virtual & Crypto Assets Exchange Association revealed that industry players are seeking to permit leverage for retail investors at levels ranging from four to ten times. Currently, customers in Japan can only double their exposure through borrowing.

Genki Oda, Vice Chairman of the association, highlighted the potential benefits of reforming the leverage rule, stating that it could make Japan a more attractive destination for crypto and blockchain companies. Oda believes that such a step would also encourage increased trading activity in the market.

Local crypto exchanges in Japan are already in discussions to establish a consensus on the proposed leverage limit. These exchanges are expected to present their proposal to the Financial Services Agency (FSA), the country’s top financial regulator. The FSA has expressed its willingness to engage in discussions with digital asset businesses regarding the relaxation of margin trading limits, provided strong justifications are provided that align with the government’s objective of expanding blockchain-related sectors.

This development coincides with Hong Kong’s efforts to position itself as the crypto hub of Asia, prompting Japan to consider easing some of its own crypto rules, including token listing and taxation regulations.

Previously, cryptocurrency platforms in Japan allowed trading with leverage of up to 25 times, resulting in significant volumes of margin trading reaching around $500 billion in 2020 and 2021. However, after the FSA imposed a limit of two times leverage, trading volumes plummeted by 75% in 2022. This measure aimed 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 crypto market volatility has subsided over the past few years, and Japan’s local crypto exchanges are well-prepared to help investors manage risks associated with margin trading.

Japan is considering relaxing curbs on crypto margin trading to attract more companies and boost the industry’s growth. The move could make the country more appealing to crypto and blockchain firms, while also encouraging increased trading activity. The Financial Services Agency is engaging in discussions with local exchanges to determine the appropriate leverage limits. This development comes as Japan seeks to maintain its position in the evolving landscape of cryptocurrency regulations and foster a favorable environment for digital asset businesses.


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