Japanese crypto exchanges want looser margin trading rules to grow.

Crypto exchanges in Japan are seeking regulations that would allow retail investors to have higher leverage on margin trading.

The Virtual & Crypto Assets Exchange Association of Japan revealed that the crypto exchanges in the country are seeking permitted leverage for retail investors of four to ten times, as currently, crypto investors are only allowed twice the leverage on their positions.

Previously, crypto exchanges in Japan offered as much as 25x leverage which led to a soaring annual margin trading volume of $500 billion in 2020 and 2021, but these figures have plunged nearly 75% after the financial regulators put a limit of 2x leverage on margin trading.

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In a Bloomberg interview, Genki Oda, Vice Chairman of Japan’s Virtual & Crypto Assets Exchange Association, emphasized the potential of reforming leverage rules to attract more crypto and blockchain companies to Japan.

Oda believes that updating these rules could stimulate industry growth while maintaining a focus on investor protection.

Local crypto exchanges are looking to reach a consensus on the leverage limit and then take the proposal to the country’s Financial Service Agency (FSA) by next month, as per the Vice Chairman.

However, Japanese crypto exchanges face a challenging task in persuading the financial regulator to relax margin trading regulations, as Japan has a reputation for strict cryptocurrency regulations that prioritize investor protection.

Despite this, an official from the Financial Services Agency (FSA) indicated a willingness to engage in discussions with crypto exchanges regarding the matter.

Earlier this month, Japan implemented stricter anti-money laundering rules specifically targeting cryptocurrencies, embracing FATF’s controversial Travel Rule for crypto exchanges in the country.

Cryptocurrency exchanges in Japan are required to share transaction information with each other when the transactions exceed a certain threshold, and the new crypto regulations in Japan also put restrictions on transactions from the exchange to platforms that have not adopted the Travel Rule Universal Solution Technology rule yet.

Most crypto exchanges in Japan are currently struggling to comply with these new regulations, and it remains to be seen how they will navigate the challenge of convincing the financial regulator to relax regulations that may potentially increase risks for retail investors, considering the country’s stance on cryptocurrency regulations.

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