Japans Crypto Exchanges Seek Looser Margin Trading Regulations for Growth

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Japan's crypto exchanges are seeking regulations that would allow retail investors higher leverage on margin trading.

Japan's Virtual & Crypto Assets Exchange Association revealed that the crypto exchanges in the country are seeking permitted leverage for retail investors of four to ten times.

Currently, crypto investors are only allowed twice the leverage on their positions.

Crypto exchanges in Japan used to offer as much as 25x leverage which led to a soaring annual margin trading volume of $500 billion in 2020 and 2021.

However, these figures have plunged nearly 75% after the financial regulators put a limit of 2x leverage on margin trading.

Japan Opening Up To Crypto Firms？

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 countrys Financial Service Agency (FSA) by next month, as per the Vice Chairman.

Local crypto exchanges in Japan face a challenging task in persuading the financial regulator to relax margin trading regulations.

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.

However, these exchanges will need to provide justifications to the FSA, explaining how increasing leverage on margin trading can contribute to the government's objective of attracting more blockchain companies to the country.

Japan Implements New Crypto Regulations

Earlier this month, Japan implemented stricter anti-money laundering rules specifically targeting cryptocurrencies.

The Asian country has embraced FATFs controversial Travel Rule for crypto exchanges in the country.

According to the Travel Rule,

cryptocurrency exchanges

are required to share transaction information with each other when the transactions exceed a certain threshold.

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.

It will be intriguing to observe how local exchanges in Japan 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.