Japanese Crypto Exchanges Call for Relaxation of Margin Trading Restrictions

Japanese cryptocurrency exchanges are pleading with regulators to relax limitations on margin trading, especially for well-known cryptocurrencies like bitcoin (BTC). Prior to this, these exchanges permitted leverage of up to 25 times the principle capital, which resulted in significant trade volumes that, according to Bloomberg, reached $500 billion yearly in 2020 and 2021. However, Japanese regulators restricted leverage to two times the principle capital in the beginning of 2022, which had a huge negative impact on trading volumes.

JVCEA’s Push for Revised Margin Trading Caps

Revisions to margin trading caps are being pushed for by the Japan Virtual and Crypto Assets Exchange Association (JVCEA), a self-regulatory organization that represents regional exchanges. Higher leverage limitations, specifically a minimum of 10 times the principle capital, are what the JVCEA is asking for. In a Bloomberg interview, Genki Oda, vice chairman of the JVCEA, underlined that loosening the leverage regulation may make Japan more attractive to cryptocurrency and blockchain companies, which would increase trading activity. Revisions to margin trading caps are subject to rigorous evaluations and interactions with industry participants. Regulators will carefully evaluate the suggestions while taking market risks and investor protection into account.

The Benefits of Revised Margin Trading Caps

The JVCEA’s initiatives to modify margin trading caps seek to increase market liquidity while luring a wider spectrum of traders, including institutional investors. Trading would be made more efficient if larger leverage was permitted. According to recent data, Japanese crypto exchanges handled trading volumes totaling over $110 million in the previous day, with the majority of these transactions including the trading of bitcoin (BTC), ether (ETH), and xrp (XRP).

Japan’s Evolving Crypto Landscape

JVCEA’s appeal comes as Japan is beginning to accept stablecoin usage and crypto regulation more and more. In order to assist the development of NFT and virtual land-related firms in the nation, lawmakers are looking into Web3 regulations. Local banks are also working on plans to launch their own stablecoins—tokens tethered to fiat money like the Japanese yen—in the coming months. These programs show how Japan’s attitude toward cryptocurrencies and blockchain technology is changing.