A senior figure in Japan’s ruling Liberal Democratic Party (LDP), Seiji Kihara, has urged regulators to consider easing the country’s restrictions on cryptocurrency trading leverage. Speaking at a financial summit in Tokyo, Kihara described the current 2x leverage cap as overly restrictive and signaled his intention to push for regulatory reforms.
Calls for Higher Leverage Limits
Kihara leads the Next-Generation AI and On-Chain Finance Project Team, an LDP policy group focused on promoting innovation in digital finance. He argued that robust market liquidity and effective price discovery are essential for the healthy development of Japan’s crypto industry.
Japan currently imposes a strict limit of 2x leverage on cryptocurrency margin trading, a much lower threshold compared to many global markets. Kihara believes this policy puts domestic platforms at a disadvantage, discouraging high-volume traders and limiting the country’s appeal to international exchanges.
At the summit, he outlined plans to campaign for a regulatory shift, stating that “the current cap is too restrictive” for fostering a vibrant trading environment.
Kihara stated that adequate liquidity and reliable price formation are necessary to support development in the crypto sector. He stressed the need to balance market growth with effective investor safeguards, especially as Japan explores broader reforms to treat crypto assets within its financial securities framework.
Potential Impact on Japanese Markets
Japan’s approach to regulating crypto leverage has historically been more cautious than in many major jurisdictions, often focused on reducing risk for retail investors. If implemented, increasing the leverage cap could make Japanese exchanges more competitive and stimulate trading activity. However, this shift could also heighten concerns about investor protection and potential market volatility.
Regulators would need to balance the goals of attracting greater liquidity and investment against the imperative of protecting less experienced traders from heightened risks.
| Country/Region | Leverage Cap | Regulatory Approach |
|---|---|---|
| Japan | 2x (current) | Strict investor protection |
| US | Varies by exchange (often 2x-5x on regulated platforms) | Debated, focused on classification and supervision |
| EU | Not unified, varies by member country | MiCA provides common rules for crypto service providers |
| UK | No specific cap, products restricted for retail from 2021 | Includes crypto under financial services laws |
Comparison with Global Regulatory Trends
Elsewhere, governments are taking steps to define and regulate the crypto sector. In the United States, lawmakers are considering the CLARITY Act, which aims to clarify when tokens are considered securities or commodities and to establish more transparent market rules. The United Kingdom is integrating crypto and stablecoins into its financial services regulatory regime, while the European Union recently implemented its Markets in Crypto-Assets (MiCA) framework, standardizing oversight for crypto activities across member countries.
These global developments reflect a growing consensus that clear rules can foster industry growth and attract international investment. As jurisdictions compete to establish themselves as crypto-friendly hubs, regulation has become a key factor for exchanges, investors, and startups deciding where to operate.
Japan is also considering the introduction of its first Bitcoin exchange-traded fund (ETF) by 2028. This move could pave the way for significant institutional investment, as pension funds and other traditional asset managers look for diverse investment opportunities.
Mini dictionary: Bitcoin ETF – A Bitcoin exchange-traded fund (ETF) is a tradable fund that tracks the price of Bitcoin and allows investors to gain exposure to the cryptocurrency through traditional stock markets without directly buying or storing Bitcoin.
Kihara’s push for higher leverage limits comes as lawmakers and regulators in several leading economies re-examine digital asset policies to better balance innovation, investor safety, and global competition.
