Proposal to Amend Cryptocurrency Leverage Regulations in Japan

On October 17, the Japan Cryptocurrency Business Association (JCBA) presented a proposal to the Japan Virtual Currency Exchange Association (JVCEA) to review the leverage ratio in cryptocurrency margin trading, according to Coinpost. JCBA argues that the current leverage ratio is overly restrictive compared to other derivative markets, suggesting a shift to a calculation method based on past price volatility (volatility), and has sought cooperation from JVCEA for the realization of the amendment proposal.

Previously, the maximum leverage of 25 times, akin to the domestic Forex (foreign exchange margin trading) market, was set for individual trading in cryptocurrency margin. However, it was reduced to four times in October 2019, and further lowered to a uniform two times in May 2020 following the enforcement of the amended Financial Instruments and Exchange Act.

On the other hand, for corporate transactions, a method of calculating leverage based on the past weekly price fluctuations of individual stocks had been introduced. Now, JCBA is advocating for the application of this corporate method to individual transactions as well. Currently, the leverage for corporates ranges between four to nine times.

Trend Towards Volatility Stabilization

Four years post the amendment of the Financial Instruments and Exchange Act in 2019, the cryptocurrency market has seen expanded global recognition and an increase in participants. Consequently, since the peak in early 2018, the price fluctuations in cryptocurrency have decreased, along with a decline in speculative elements.

In Japan, recent years have seen the progression in the establishment of stablecoins and tax systems, including the development of financial product transaction operators handling them, while the regulations on leverage trading have remained unchanged since the legal revisions of 2019.

In 2019, the social perception towards cryptocurrency was generally that it “mainly encourages speculation”. However, of late, there has been an increase in uses such as NFTs, payments, DAOs, and asset preservation. “To recognize cryptocurrencies as a formal asset class, it’s essential to develop the derivative market following the development of the spot market,” emphasized JCBA. There’s also an intent to attract users who moved to overseas exchanges in search of higher leverage back to Japan through the amendment of leverage ratios.

Impacts of Reduced Leverage Ratios

Since the legal amendment, trading volume and open interest have drastically decreased, particularly the decline in cryptocurrency margin trading compared to spot trading is notable.

According to the data released by the Japan Virtual Currency Exchange Association, the effect has led to the financial instability of domestic exchanges and a subsequent outflow of individual investors seeking high-leverage exchanges abroad, contradicting investor protection viewpoints.

Currently, a leverage of 25 times is set in Forex trading, and the domestic trading volume in the fiscal year 2022 grew to a colossal market reaching 1,074 trillion yen. Nevertheless, JCBA highlighted that individuals tend to restrain risk, with the effective leverage being kept at four to five times.

The proposals by JCBA will be reviewed within the certified self-regulatory organization (JVCEA) and concerned parties. JVCEA holds the position of a certified self-regulatory organization under the Payment Services Act as “Certified Payment Settlement Business Association” and under the Financial Instruments and Exchange Act as “Certified Financial Instruments Trading Business Association”.

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Japan’s JCBA Submits Initial Proposal for IEO Regulatory Reform to JVCEA

Key Takeaways

JCBA (Japan Cryptocurrency Business Association) submits initial proposal for IEO (Initial Exchange Offering) regulatory reform to JVCEA (Japan Virtual Currency Exchange Association).

The proposal outlines four key agendas aimed at stabilizing the IEO market.

The reform aims to enhance user protection and promote domestic IEOs over foreign exchanges.


The Japan Cryptocurrency Business Association (JCBA), headquartered in Chiyoda, Tokyo and led by President Hiroshi Hirosue, announced the submission of an initial proposal for the reform of the IEO (Initial Exchange Offering) system. The proposal was developed by the ICO & IEO Subcommittee, chaired by Seihiro Yoshida, and submitted to the Japan Virtual Currency Exchange Association (JVCEA), led by President Genki Oda.

Background and Current Issues

Since May of this year, the ICO & IEO Subcommittee has been actively discussing the future of the IEO system, leveraging insights from various businesses involved in cryptocurrency and Web3. The proposal consolidates these discussions and has been submitted to JVCEA, a self-regulatory body for cryptocurrency exchanges and related derivative trading.

Four Agendas for IEO Reform

The proposal outlines four key agendas for reform:

Price Determination: Diversification of pricing methods and explicit warnings about pricing.

Liquidity: Setting liquidity targets at the time of listing and ensuring a conducive environment for liquidity.

Price Stability: Establishing rules for price stabilization measures at the time of listing.

Sale Restrictions: Formalizing and tightening lock-up regulations for issuers and underwriting exchanges.

Future Directions

The proposal is an initial draft discussed solely within the JCBA. Future discussions will involve various stakeholders and focus on the feasibility of implementing these reforms within the scope of self-regulatory rules.

The reform aims to encourage users to manage their assets under Japanese regulations rather than using foreign exchanges, thereby enhancing user protection.

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Japanese government considers relaxing strict coin listing rules

The Japanese government is considering a proposal to make it easier for registered crypto exchanges to list digital assets in the local retail trading market.

Sources quoted in Bloomerg said that if the new rules are passed, exchanges that have registered with the Financial Services Agency (FSA) would be able to list certain assets without performing a lengthy screening process.

Digital assets that have been listed for more than six months on at least three domestic exchanges would be exempted from additional screening. For example, exchanges would find it easier to list Bitcoin (BTC) and Ether (ETH) if the proposal passes.

There has not yet been a final decision on the rule change.

Current listing rules require prospective coins to undergo an extensive screening process which can take over six months to complete. Members of the Japan Virtual and Crypto Exchange Association (JVCEA) have complained that the stringent screening process has precluded the $1 trillion Japanese crypto industry from growing in a significant way.

Members of the JVCEA have reportedly argued that changing the existing rules to allow for expedient processing could increase Japanese involvement in the global crypto markets.

As of now, Coincheck and GMO Coin have 17 listed coins each, making them the biggest exchanges in Japan by number of listings. Japanese exchanges have lagged far behind global exchanges which have coins listed by the hundreds in the case of top exchanges such as Coinbase and Binance.

The proposed rules come at an interesting time as both Coinbase and FTX have entered the competitive Japanese crypto market with subsidiaries registering crypto exchanges.

Related: Major crypto exchanges eye Asian market amid growing regulatory clarity

On Feb. 2, Sam Bankman-Fried’s FTX exchange acquired Liquid Group, the operator of the Japanese registered Quoine crypto exchange. Quoine will eventually eventually “integrate FTX’s existing products and services into its own offerings.”

Last August, Coinbase partnered with Mitsubishi UFJ Financial Group (MUFG) to launch a branch of its exchange. The partnership with MUFG provides users with a fiat on-ramp and off-ramp.