Cryptocurrency exchanges in Japan are calling for regulators to ease restrictions on margin trading for popular cryptocurrencies like bitcoin (BTC). In the past, these exchanges offered leverage of up to 25 times the principal capital, resulting in significant trading volumes reaching $500 billion annually in 2020 and 2021. However, in early 2022, Japanese regulators imposed a limit of only two times the principal capital for crypto exchanges, causing a significant decline in trading volumes.
The Japan Virtual and Crypto Assets Exchange Association (JVCEA), a self-regulatory organization representing local exchanges, argues that these restrictions impede market growth and discourage new participants. The association is demanding higher leverage limits, suggesting a minimum of 10 times the principal capital. According to JVCEA Vice Chairman Genki Oda, relaxing the leverage rule could make Japan a more appealing destination for crypto and blockchain companies, potentially boosting trading activity.
The proposals put forward by JVCEA will be evaluated by regulators, who will consider market risks and investor protection. Any revisions to margin trading caps will undergo thorough reviews and consultations with industry stakeholders. The goal of revising margin trading limits is to attract a broader range of traders, including institutional investors, and improve market liquidity. Additionally, allowing higher leverage would enable traders to better manage their positions, according to JVCEA.
Recent data shows that Japanese crypto exchanges processed slightly over $110 million worth of trading volumes in the past 24 hours. The majority of the volume was generated by bitcoin (BTC), ether (ETH), and xrp (XRP) trading.