Japan is close to easing restrictions on leveraged trading in crypto assets. Seiji Kihara, a senior member of the ruling party, stated that the current 2x leverage cap is too strict and hinders market liquidity and price discovery. This discussion continues Japan's recent accelerated push for crypto regulatory reforms.
The ruling party is studying increasing leverage.
According to Nikkei, a project team led by Seiji Kihara is studying revisions to existing cryptocurrency trading rules with the aim of boosting activity in the domestic market and attracting funds back to Japan.
Leveraged trading allows investors to borrow funds on margin to establish positions larger than their principal. Japan currently limits leverage to 2 times the margin, which is among the stricter limits in major crypto markets.
Seiji Kihara stated that an active market requires sufficient liquidity and a more efficient price discovery mechanism. Relaxing leverage restrictions would be a logical step if Japan wants to enhance the competitiveness of its cryptocurrency market. However, the report did not provide a timetable for the implementation of the new regulations.
Financial productization reform first
Prior to the discussion on leverage, Japan had already passed an amendment to the Financial Instruments and Exchange Act this month, shifting the regulatory approach of crypto assets from being primarily a payment tool to including them within the framework of financial products.
- Some cryptocurrency issuers are required to disclose information annually.
- Insider trading rules extended to crypto trading
- Penalties for operating encryption businesses without a license have been increased.
According to CoinPost, the maximum prison sentence for operating a crypto business without registration will be increased from 3 years to 10 years, and the maximum fine will be increased from 3 million yen to 10 million yen.
The amendments also provide a legal basis for separate taxation of crypto gains, with an expected effective tax rate of approximately 20%, and allow for a three-year loss carryforward. The relevant tax adjustments are expected to take effect in January 2028, provided that enforcement arrangements are completed by fiscal year 2027.
Domestic Bitcoin ETFs continue to advance
The same round of legislative changes has also spurred preparations for a domestic Japanese cryptocurrency ETF. Japan's Financial Services Agency is studying amendments to the Investment Trust Rules to allow ETFs and investment trusts to directly hold cryptocurrency assets in the future.
According to a previous Nikkei report, if the regulatory framework is successfully completed, Japan's first domestically-funded Bitcoin ETF could be launched as early as 2028. However, the current legal amendments do not mean that the ETF can be listed immediately; regulators still need to supplement more detailed investment trust rules.
Currently, several large financial institutions have begun preparing for potential products, including SBI Securities, Rakuten Securities, Nomura, Daiwa Securities, Asset Management One, and institutions related to SMBC.
The Web3 landscape continues to expand.
The discussion on leverage rules is also linked to Japan's broader digital asset and startup policies. Japanese Prime Minister Sanae Takaichi stated at WebX 2026 this month that Web3 has been incorporated into the national innovation strategy, rather than just a separate issue of crypto policy.
If the leverage cap is ultimately raised, the Japanese crypto market will see another regulatory adjustment, which will be linked to the classification of financial products, tax reform, and the framework for a domestic Bitcoin ETF.
