Japan wants to halve leverage cap in crypto margin trading to 2x

The Financial Services Agency of Japan, the country’s financial watchdog, plans to cut the permitted leverage cap in cryptocurrency margin trading.

If the plan goes through, the new leverage limit would be 2x from the current self-imposed cap of 4x, Japan Times reported Saturday, citing “informed sources.”

The FSA has reportedly proposed the move due to the volatility of the cryptocurrency markets and regulations in Europe and the U.S. The plan also follows discussions with the Japan Virtual Currency Exchange Association, the country's self-regulatory authority.

Margin trading allows trading instruments using borrowed funds. It can help multiply profits, but can also lead to multiplied losses. Some exchanges, such as Binance, offer leverage of up to 125x.

Japan’s proposed rule, if passed, will be included in a Cabinet Office order linked to the revised Financial Instruments and Exchange Act expected in spring, per the report. Accordingly, cryptocurrency exchanges will have to revise their offerings.

About Author

Yogita Khatri is a senior reporter at The Block, covering all things crypto. As one of the earliest team members, Yogita has played a pivotal role in breaking numerous stories, exclusives and scoops. With nearly 3,000 articles under her belt, Yogita holds the records as The Block's most-published and most-read author of all time. Prior to joining The Block, Yogita worked at crypto publication CoinDesk and The Economic Times, where she wrote on personal finance. To contact her, email: [email protected]. For her latest work, follow her on X @Yogita_Khatri5.