Japan Weighs Easing 2x Crypto Leverage Cap as Broader Market Reforms Advance

Pressure to revisit the 2x cap

According to Nikkei, Kihara said at a financial conference in Tokyo on July 14 that Japan’s leverage ceiling is “too strict” and should be reconsidered. Kihara heads the Liberal Democratic Party’s Next Generation AI and On-Chain Finance Project Team, which is preparing policy changes tied to the country’s broader crypto overhaul.

He said healthier trading depends on sufficient liquidity and effective price discovery, and argued that relaxing leverage restrictions would support both. Japan currently limits crypto leverage to twice the value of posted margin, making it one of the strictest major markets for this kind of trading. Nikkei did not report a timetable for any rule change.

Part of a larger legal overhaul

The leverage debate comes shortly after Japan approved amendments to the Financial Instruments and Exchange Act. The changes reclassify cryptocurrencies as financial products rather than primarily treating them as payment instruments under the Payment Services Act.

That new framework adds insider trading rules for crypto transactions, requires annual disclosures from issuers of certain crypto assets and increases penalties for operating without registration. According to CoinPost, the maximum prison term for running an unregistered crypto business will rise from three years to 10 years, while the maximum fine will increase from 3 million yen to 10 million yen.

The amended law also creates the legal basis for separate taxation of crypto gains at an effective rate of about 20%, along with a three-year loss carry-forward deduction. CoinPost reported those tax changes are expected to take effect in January 2028, since enforcement is scheduled during the 2027 fiscal year. Cabinet ordinances and supervisory guidelines are still needed before the framework is fully in place.

ETF plans gather pace

The same legislative changes have also advanced Japan’s plans for domestic crypto exchange-traded funds. Earlier reporting cited by crypto.news said the Financial Services Agency is preparing revisions to investment trust rules that would allow ETFs and investment trusts to hold crypto assets directly.

Nikkei reported that the first domestic Bitcoin ETF could launch as early as 2028 once the regulatory framework is completed. The current legal amendments do not immediately permit ETF listings, and regulators still need to finalize detailed investment trust rules before asset managers can introduce products with direct crypto exposure.

Japan Exchange Group Chief Executive Hiroki Yamamichi has previously said a crypto ETF could be introduced once the legal and tax framework is completed. Several large financial institutions, including SBI Securities, Rakuten Securities, Nomura, Daiwa, Asset Management One and firms affiliated with SMBC, have reportedly been studying products that could follow once rules are finalized.

Web3 policy and market positioning

The push to revisit leverage limits also sits within Japan’s broader digital asset and startup strategy. Earlier this month, Prime Minister Sanae Takaichi said at WebX 2026 that Web3 is part of Japan’s national innovation agenda rather than a standalone crypto policy. Her remarks focused on cooperation between startups, investors and technology companies, without announcing fresh funding or immediate regulatory changes.

For now, the leverage proposal remains at the policy-development stage. But together with the new financial product classification for crypto, proposed tax changes and work on a domestic Bitcoin ETF framework, it signals that Japan is continuing to move digital assets closer to its mainstream financial system while trying to draw more trading activity back to the domestic market.