[NEWS] JVCEA and JCBA to request government to raise upper limit on leveraged transactions

It has been learned that the domestic self-regulatory organizations for crypto assets (virtual currencies), JVCEA (Japan Cryptocurrency Exchange Association) and JCBA (Japan Cryptocurrency Business Association), are planning to ask the Financial Services Agency and government officials to raise the upper limit of the margin ratio for crypto asset leverage trading. Bloomberg reported on the 20th.

The current margin ratio is 2x, which was significantly reduced from the previous 25x following a legal amendment in May 2020.

The amount of margin trading has been decreasing significantly year by year, from over 97 trillion yen in 2020, when a grace period was established, to about 37 trillion yen in 2021 and about 15 trillion yen in 2022.

In light of this situation, the aim is to revitalize domestic crypto asset trading by raising the upper limit. Currently, over 90% of crypto asset leverage trading in Japan is done by individuals, but by revitalizing the market, it is expected that institutional investors will also enter the market.

According to JVCEA Vice Chairman Genki Oda, who spoke to Bloomberg, the group will put together a draft with JCBA and submit a joint request to the Financial Services Agency and government officials.

As the government moves to promote Web 3.0 using crypto assets and blockchain, Oda pointed out that "crypto-related companies will flock to Japan" as crypto-asset trading becomes more active.

Currently, the maximum margin for foreign exchange transactions, which are sometimes used for comparison, is 25 times, but in reality, most transactions are around 6 to 8 times. For this reason, JVCEA member companies are calling for the upper limit to be raised to 4 to 10 times.

On the other hand, crypto assets are known to have volatile prices, and the margin ratio has been lowered once, so the hurdle for revision is high.

According to Bloomberg, a FSA official said that he is open to discussing raising the upper limit of the margin ratio, but that a convincing reason must be presented.

He also said it is unclear how raising the upper limit on margin rates will relate to government policy on promoting Web 3.0 at this time.

Source:Bloomberg
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