Japan’s key crypto group, the Japan Crypto Asset Business Association (JCBA), is proposing a change in the leverage ratio for digital asset trading to attract traders back to Japanese markets. The current proposal suggests increasing the leverage ratio from 2x to either 4x or 9x. This change aims to entice traders who have sought better leverage conditions overseas.
In the past, individual traders in Japan enjoyed a 25x leverage ratio for trading digital currencies, similar to the foreign exchange market conditions. However, this was reduced to 4x in October 2019 and further decreased to 2x in May 2020. On the other hand, businesses’ leverage was calculated based on stock price changes over the past week, ranging from 4 to 9 times.
Boosting the Leverage Limit
The JCBA believes that adopting the business leverage rate calculation method for individual traders might be more effective. By increasing the leverage ratio, they aim to stabilize volatility in the market and provide a safer environment for investors.
Stabilizing Volatility in the Market
Since the revised Financial Instruments and Exchange Act came into effect in 2019, the crypto market has undergone significant changes and witnessed global growth. However, these changes have led to a decline in trading volumes, particularly in margin trading compared to spot trading. JCBA argues that this decline does not adequately protect investors and highlights that individuals tend to prefer a safer effective leverage ratio of around 4 to 5 times.
The JCBA’s proposals will undergo discussion among stakeholders such as the Certified Self-Regulatory Association (JVCEA), which plays a crucial role in decision-making processes regarding Japan’s financial systems.
Hot Take: Japan Seeks to Boost Crypto Trading with Increased Leverage
Japan’s crypto industry is looking to attract traders back home by proposing an increase in the leverage ratio for digital asset trading. The Japan Crypto Asset Business Association suggests raising the ratio from 2x to either 4x or 9x, aiming to entice traders who have sought better leverage conditions abroad. This proposal comes after previous reductions in leverage ratios, which led to a decline in trading volumes. By stabilizing volatility in the market and providing a safer environment for investors, Japan hopes to regain its position as an attractive destination for crypto traders.
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