Japan's ruling party is considering easing the country's two-times cap on crypto leverage trading, which lawmaker Seiji Kihara says is too strict for market liquidity and price discovery. The discussion follows amendments that reclassify cryptocurrencies as financial products under Japanese financial law, and sits alongside separate taxation of crypto gains and plans for a domestic Bitcoin ETF.
Seiji Kihara, who heads the Liberal Democratic Party's Next Generation AI and On-Chain Finance Project Team, told a financial conference in Tokyo on July 14 that Japan's leverage limit on crypto trading is limiting market activity and should be relaxed as part of the country's digital asset reforms.
He said the existing two-times leverage cap is "too strict" and argued that a healthy market requires enough liquidity and an effective price discovery mechanism. Easing the restriction, he said, is a natural step if Japan wants to strengthen its cryptocurrency market.
Japan's cap is one of the strictest among major markets
Leverage trading allows investors to borrow funds against collateral deposited in their trading accounts, letting them control positions larger than the capital they initially commit. Japan currently limits leverage to two times the value of posted margin, one of the strictest caps among major crypto markets.
Kihara's project team is working on policy changes to the regulations governing crypto trading, intended to encourage more capital to return to Japan's domestic market by improving trading activity and liquidity. But Nikkei did not report a specific timetable for introducing revised rules.
Reclassification law raises penalties and sets up separate taxation
The leverage discussion follows legislative changes approved earlier this month. Japan enacted amendments to the Financial Instruments and Exchange Act that reclassify cryptocurrencies as financial products instead of treating them primarily as payment instruments under the Payment Services Act.
That legislation introduces insider trading rules for crypto transactions, requires annual disclosures from issuers of certain crypto assets and increases penalties for businesses operating without registration. According to CoinPost, the maximum prison sentence for running an unregistered crypto business will rise from three years to 10 years, and the maximum fine from 3 million yen to 10 million yen.
The amended law also establishes the legal basis for separate taxation of crypto gains at an effective rate of about 20%, together with a three-year loss carry-forward deduction. Those tax changes are expected to take effect in January 2028 because enforcement is scheduled during the 2027 fiscal year, according to CoinPost.
Bitcoin ETF work advances in parallel
The same legislative changes have also advanced Japan's plans for a domestic crypto ETF. The Financial Services Agency is preparing revisions to investment trust rules that would allow ETFs and investment trusts to hold crypto assets directly, and Nikkei reported that the first domestic Bitcoin ETF could launch as early as 2028 once the regulatory framework is completed.
Cabinet ordinances and supervisory guidelines are still required before the new framework is fully implemented.
Source: crypto.news
Trading involves risk.
Risk Disclaimer
