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Seeking to attract traders back home from foreign shores, Japan’s key crypto group has put forth a fresh idea. By tweaking the rules on digital currency trading, they hope to make Japanese markets more alluring.
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 25x leverage while trading digital currencies, mirroring the country’s foreign exchange market conditions. However, this leverage had been slashed down to a mere 4x in October 2019. A further change came in May 2020, shrinking the rate even more, settling it down at 2x.
For businesses, though, the system worked differently. Their leverage was calculated based on the price changes of individual stocks over the past week. JCBA now believes this approach might work better for individual traders, too. At present, the business leverage rate floats between 4 and 9 times.
Stabilizing Volatility in the Market
Since 2019, when the revised FIEA came into action, the crypto market landscape has witnessed considerable change. It’s growing globally, attracting more participants. When the rules changed back then, it led to a drop in trading volumes, especially in margin trading when compared to spot trading.
Many believe this decline doesn’t resonate to protect investors. After all, the more stable foreign exchange market still enjoys a 25x leverage. Despite this, JCBA points out that individuals generally prefer to play safe, keeping their effective leverage around 4 to 5 times.
In the future, JCBA’s suggestions will be up for discussion among the Certified Self-Regulatory Association (JVCEA) and other stakeholders. The JVCEA, being a certified organization, holds a key position in decision-making processes related to the country’s financial systems.