In a bid to attract more crypto and blockchain companies, Japanese regulators are considering easing restrictions on margin trading, with industry players hoping for leverage limits of four to ten times for retail investors. This move is reportedly in response to Western nations cracking down on cryptocurrencies, while Asian countries like Hong Kong aim to establish themselves as crypto hubs. With Japan being at the forefront of blockchain technology, this potential change in regulations could encourage more trading in the market.
Following discussions between local exchanges and the Japan Virtual & Crypto Assets Exchange Association, a recommended leverage limit will be proposed to the Financial Services Agency (FSA), Japan’s top financial regulator. However, the FSA official stated that strong justifications are needed for relaxing margin trading limits, as they should align with the government’s objective of expanding the blockchain sector.
Notably, crypto platforms in Japan previously allowed trading with leverage up to 25 times, leading to high volumes of margin trading of around $500 billion in 2020 and 2021. This changed in 2022 when the FSA imposed a two-times leverage limit, subsequently decreasing trading volumes by 75%. This policy aimed to reduce excessive speculation and protect investors from substantial losses.
Globally, spot margin trading availability varies based on local regulations, with most platforms offering leverage between five and ten times the initial deposit. Some even provide higher rates, showcasing the risky speculation that can cause fluctuations in the crypto market. However, Genki Oda, Vice Chairman of the Japan Virtual & Crypto Assets Exchange Association, stated that crypto volatility has decreased over the past three years. Oda believes that Japan’s local crypto exchanges can help investors manage risks associated with margin trading.
On the other hand, some argue that easing restrictions could lead to more market instability, drawing attention to the inherent volatility of the cryptocurrency market. Critics question whether increased margin trading is worth the potential risks to investors.
If Japan’s regulators relax curbs on margin trading, it could create a more engaging environment for crypto and blockchain companies, while potentially advancing the country’s global position within the industry. However, it remains to be seen how these changes might affect market stability and investor protection. By maintaining open discussions and finding the right balance between innovation and regulation, Japan aims to forge a place for itself as a key player in the future of blockchain and digital assets.
Source: Coingape
