Japanese Financial Regulator to Limit Crypto Margin Trading

The Japanese Financial Services Agency (FSA) has officially proposed to cut down the leverage rate limit of cryptocurrency margin trading in Japan by half.

The proposition was covered in detail in an announcement from January 14 in a cabinet office ordinance — an order published together with a new law.

If approved, the proposition will be the first Japanese government regulation of crypto margin trading rate. Per Nikkei, the country did not have state-set regulations of the kind before.

As reported, the order is scheduled for implementation in April, when a reviewed version of the Financial Instruments and Exchange Act is enacted. Public comments on the ordinance are accepted until February 13.

Margin trading is about using borrowed funds in order to increase profits, but it is quite risky, since losses may be higher than trader’s initial investments.

As Nikkei puts it, the FSA attempts to shield investors from “an excessive amount of speculation and the risk of loss due to volatility”.

Some believe that it’s about time to introduce clear regulations on margin trading, as 90% of crypto trades come from derivatives. As data provided by the Japan Virtual Currency Exchange Association (JVCEA) — the official Japanese self-regulatory organization overseeing crypto — suggests, that from April 2017 to March 2018 the national volume of leveraged, margin and futures trading for crypto was higher than of spot trading.

Last year JVCEA introduced a 4x leverage limit, which made several cryptocurrency exchanges such as Coincheck decrease their rates. However, some economists proposed to lower these rates even further to 2x in order to meet the demands of such jurisdictions as the European Union.