Crypto Exchanges Push For Softer Trading Restrictions In Japan To Boost Trading Activity

Cryptocurrency exchanges in Japan are rallying for the softening of restrictions on margin trading, despite the tumultuous crash of the global digital asset market last year.

A considerable number of industry professionals are advocating for the authorization of retail investors to employ leverage ranging between four to 10 times. Presently, investors can merely augment exposure by doubling through borrowing, according to Japan Virtual and Crypto Assets Exchange Association.

Genki Oda, the Vice Chairman of the association, told Bloomberg, “Reforming the leverage rule could make Japan more attractive for crypto and blockchain companies.”

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He also posited that the revision would invigorate trading activities.

The country's digital asset exchanges are engaging in discussions to converge on a unanimously agreed leverage limit and have plans to present their proposition to the Financial Services Agency (FSA) in the imminent future, potentially as early as next month.

Historically, Japan has been somewhat liberal in easing crypto regulations in areas such as token listing and taxation. However, the country is generally regarded as having stringent regulations with an emphasis on safeguarding investors.

This focus was evident when the Japanese division of the defunct FTX exchange managed to refund clients despite the ongoing U.S. bankruptcy proceedings.

In response to the push for more relaxed margin trading restrictions, an FSA representative commented that cryptocurrency companies need to put forth cogent arguments as to how loosening the reins on margin trading would align with the government's objectives of bolstering blockchain-based industries.

The FSA is receptive to engaging in dialogue on the subject with digital asset enterprises.

There has been a significant decline in trading volumes on Japanese cryptocurrency platforms, which once permitted as much as 25 times leverage, resulting in an approximate $500 billion annual margin trading volume in 2020 and 2021.

The FSA, in a bid to temper rampant speculation and safeguard investors from magnified losses, imposed a two times leverage limit, which led to a 75% plunge in trading volumes by 2022.

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