Japan is moving closer to loosening its strict cryptocurrency leverage trading rules, as senior lawmakers push for reforms aimed at making the country’s digital asset market more competitive and attractive to investors.
Seiji Kihara, a leading member of Japan’s ruling Liberal Democratic Party and head of its Next Generation AI and On-Chain Finance Project Team, recently argued that the country’s current 2x leverage limit on crypto trading is too restrictive. Speaking at a financial conference in Tokyo, he said stronger market liquidity and more efficient price discovery require a less restrictive trading environment.
Japan currently has one of the strictest leverage limits among major crypto markets, allowing traders to borrow only up to twice the value of their deposited collateral. Supporters of reform believe easing this cap could encourage greater trading activity, attract more capital to domestic exchanges, and strengthen Japan’s position in the global digital asset industry.
Kihara’s comments come as Japan continues a broader overhaul of its cryptocurrency regulations. Earlier this month, lawmakers approved significant amendments to the country’s financial laws that officially classify cryptocurrencies as financial products rather than primarily as payment instruments.
The new framework introduces stricter oversight of the crypto industry, including insider trading rules, annual disclosure requirements for certain digital asset issuers, and tougher penalties for companies operating without proper registration. Under the updated rules, the maximum prison sentence for running an unregistered crypto business will increase from three years to ten years, while fines will also rise substantially.
The reforms are also expected to pave the way for more investor-friendly tax treatment. Current plans would allow crypto gains to be taxed separately at an effective rate of around 20%, along with a three-year loss carry-forward provision. These tax changes are expected to take effect after the new regulatory framework is fully implemented.
Another major development is the growing momentum behind domestic Bitcoin exchange-traded funds (ETFs). Regulators are working on changes that would allow investment funds and ETFs to directly hold cryptocurrencies. If approved, Japan could see its first domestically listed Bitcoin ETF launch as early as 2028.
Several major financial institutions, including securities firms and asset managers, are already studying crypto investment products in anticipation of future regulatory approval. Industry leaders believe the combination of ETF access, lower taxes, and clearer regulations could help attract more institutional investment into Japan’s crypto market.
The discussion around leverage trading also fits into Japan’s wider strategy of promoting blockchain technology and Web3 innovation. Government officials have increasingly presented digital assets, blockchain applications, and decentralised technologies as part of the country’s broader economic and technology development plans.
For now, no official timetable has been announced for changing leverage limits. However, Kihara’s remarks suggest that policymakers are seriously considering further reforms as Japan seeks to balance investor protection with the goal of building a more active and competitive cryptocurrency market.
