Japan Crypto Association Eyes 4 to 9x Leverage to Lure Traders

Japan’s leading cryptocurrency organization is unveiling an innovative strategy to lure back traders who have moved their focus to foreign markets. By adjusting the regulations governing digital currency trading, they hope to make Japanese markets more appealing.

Will it work? Well… you decide.

Boosting the Leverage Limit

In the latest move, the Japan Crypto Asset Business Association (JCBA) has suggested a shift in the digital asset trading leverage ratio. The proposal asks for a jump from the present 2x ratio to 4x and 9x. This step is seen as a lure for those traders who ventured overseas in search of better leverage conditions.

Historically, individual traders in Japan enjoyed a substantial 25x leverage while trading digital currencies, aligning with the conditions of the foreign exchange market in the country. However, this leverage was dramatically reduced to a mere 4x in October 2019. The rate took another hit in May 2020, further reducing it to 2x.

Businesses, on the other hand, had a different method of determining their leverage, which was based on the price changes of individual stocks over the past week. JCBA believes that this approach could be more beneficial for individual traders as well. Currently, the business leverage rate ranges between 4 and 9 times.

The Debate on Investor Protection

Since the introduction of the revised Financial Instruments and Exchange Act (FIEA) in 2019, the crypto market in Japan has undergone significant transformation, expanding globally and attracting a broader array of participants. However, the amendments have led to a decline in trading volumes, especially in margin trading compared to spot trading.

Many believe that this drop does not effectively safeguard investors. The foreign exchange market, known for its stability, still enjoys a substantial 25x leverage. Despite this, JCBA highlights that individual traders generally prefer a more cautious approach, maintaining their effective leverage at around 4 to 5 times.

The Road Ahead

JCBA’s recommendations will soon undergo discussions among the Certified Self-Regulatory Association (JVCEA) and other key stakeholders. JVCEA, as a certified organization, wields significant influence over decisions pertaining to the nation’s financial systems.

Do you think the risks outweigh the benefits? Or is this a necessary step?