Japanese financial regulators have reportedly introduced new regulations for cryptocurrency margin trading, local news agency Nikkei reported on March 18.

The Cabinet of Japan, the executive branch of the country’s government, has reportedly approved draft amendments to Japan’s financial instruments and payment services laws, limiting leverage in cryptocurrency margin trading at two to four times the initial deposit.

Margin trading is the use of borrowed funds from a broker to trade a financial asset, thus forming a collateral for the loan.

The new rules — which are reportedly et to come into force in April 2020 — will require cryptocurrency exchange operators to register within 18 months of that date, which will purportedly enable the Financial Services Agency (FSA) to introduce relevant measures in regard to unregistered cryptocurrency "quasi-operators."

Following promulgation of the new regulations, entities dealing cryptocurrency will ostensibly be monitored similarly to securities traders in order to protect investors. Additionally, cryptocurrency operators will be divided into groups to identify those engaged in margin trading and those issuing tokens through initial coin offerings (ICOs).

With this move, regulators reportedly aim to secure investors from getting caught up in Ponzi Schemes, as well as encourage legitimate companies to practice offerings as fundraising tools.

In January, the FSA revealed that it was considering the regulation of unregistered firms that solicit investments in cryptocurrencies. The development is reportedly a bid to close a loophole in the country’s existing regulatory framework, in which unregistered firms that collect funds in crypto rather than fiat currencies remain in a legal gray zone.

Back in August 2018, the commissioner of the FSA said that the agency wants the cryptocurrency industry to “grow under appropriate regulation” in order to find the “balance” between consumer protection and technological innovation, noting: