Japanese Crypto Exchanges Push for Revised Margin Trading Caps to Enhance Market Liquidity and Attract Diverse Traders

Japanese Crypto Exchanges Push for Revised Margin Trading Caps to Enhance Market Liquidity and Attract Diverse Traders

Cryptocurrency exchanges in Japan are urging regulators to ease the limitations on margin trading for popular cryptocurrencies like bitcoin (BTC). Previously, these exchanges offered leverage of up to 25 times the principal capital, resulting in annual trading volumes of around $500 billion in 2020 and 2021, as reported by Bloomberg. However, in early 2022, Japanese regulators imposed stricter regulations, capping leverage at only twice the principal capital, leading to a significant decline in trading volumes.

The Japan Virtual and Crypto Assets Exchange Association (JVCEA), a self-regulatory body representing local exchanges, argues that these restrictions impede market growth and discourage new participants from entering the cryptocurrency space. One of the JVCEA’s key requests is an increase in leverage limits to a minimum of 10 times the principal capital. According to Genki Oda, Vice Chairman of JVCEA, reforming the leverage rule has the potential to make Japan more attractive for crypto and blockchain companies, stimulating increased trading activities.

Regulators are expected to evaluate these proposals, carefully considering market risks and investor protection. Any revisions to margin trading caps will undergo rigorous reviews and consultations with industry stakeholders.

The aim of advocating for revised margin trading caps is to attract a wider range of traders, including institutional investors, while simultaneously bolstering market liquidity. Allowing higher leverage would enable traders to more effectively manage their positions, contributing to a more efficient and dynamic trading environment, as stated by the JVCEA.

Recent data indicates that Japanese crypto exchanges processed trading volumes of slightly over $110 million in the past 24 hours, with bitcoin (BTC), ether (ETH), and XRP (XRP) comprising the majority of the trading volume.

JVCEA’s remarks come at a time when Japan is gradually embracing cryptocurrency regulations and exploring the use of stablecoins. Lawmakers are reportedly considering Web3 regulations to support the growth of NFT and virtual land-related businesses within the country, while local banks are actively working on plans to issue their own stablecoins—tokens pegged to the Japanese yen—in the near future.