Japan’s ruling party is preparing to relax the country’s strict 2x leverage cap on cryptocurrency trading, with a senior lawmaker arguing that the current limit is stifling market liquidity and price discovery. Seiji Kihara, who heads the Liberal Democratic Party’s Next Generation AI and On‑Chain Finance Project Team, said during a financial conference in Tokyo on July 14 that the two‑times cap is “too strict” and that easing it is a natural step in strengthening Japan’s crypto market.
The proposal comes just weeks after Japan enacted amendments to the Financial Instruments and Exchange Act that reclassify digital assets as financial products rather than payment instruments. The new legal framework introduces insider trading rules, annual issuer disclosures, and much heavier penalties for unregistered businesses—up to 10 years in prison and fines of ¥10 million. It also sets the stage for separate taxation of crypto gains at roughly 20% with a three‑year loss carry‑forward, effective from January 2028.
These regulatory changes underpin Japan’s broader push into on‑chain finance, now elevated to national policy, with a target of launching domestic Bitcoin exchange‑traded funds by 2028. The Financial Services Agency is already drafting revisions to investment trust rules that would permit ETFs and investment trusts to hold crypto directly. Major institutions including SBI Securities, Rakuten Securities, Nomura, Daiwa, and Asset Management One are studying crypto investment products, while SBI Global Asset Management has explored funds covering Bitcoin and Ethereum.
Kihara’s project team is focused on policy adjustments to improve liquidity and attract trading activity back to Japan. Although no timeline for implementing higher leverage limits has been set, the move would complement the country’s wider digital‑asset strategy, which Prime Minister Sanae Takaichi recently described as part of Japan’s national innovation agenda.
