The Japanese Financial Services Agency - the country's financial regulator - proposed lowering the leverage rate limit of cryptocurrency margin trading from 4x to 2x. The FSA announced the proposed measure on Jan. 14 in a cabinet office ordinance - an official order that is issued along with a new law.
If enacted, the proposal would be a first for the Japanese government in regulating the rate of crypto margin trading.
The FSA reportedly plans to put the order into practice in April when a revised version of the Financial Instruments and Exchange Act enters into effect.
The FSA is accepting public comments regarding the ordinance until Feb. 13.
Margin trading allows traders to use borrowed funds in order to increase their potential profits, but it is also a high-risk, as it introduces the possibility of losses that exceed a trader's initial investment.
According to Nikkei, the FSA aims to protect investors from "An excessive amount of speculation and the risk of loss due to volatility".
Some say introducing clear regulations on margin trading is urgent since 80% of crypto trades come from derivatives.
Data from the Japan Virtual Currency Exchange Association - the official self-regulatory organization for the crypto industry in Japan - shows that the volume of leveraged, margin and futures trading for crypto was far higher than that of spot trading in Japan from April 2017 to March 2018.
JVCEA enacted a leverage cap of 4x last year, leading some cryptocurrency exchanges in the country like Coincheck to reduce their rates.
Some economic experts have suggested that the rate should be further lowered to 2x in order to match those in other jurisdictions such as the European Union.
Japanese Regulator Officially Proposes Cutting Crypto Margin Trading Leverage Cap
Published on Jan 14, 2020
by Cointele | Published on Coinage
Coinage
Recent News
View All
Blockchain Bites: Bitcoin's Run, Uniswap's Hemorrhaging Value, Anchorage's Banking Bid
Bitcoin is nearing all-time highs in price and market cap last set three years ago.
Japan's megabanks to lead experiment with digital yen
We have, in order, Cheese Bank with a $3.3 million theft, Akropolis with its $2 million loss, Value DeFi with a whopping $6 million exploit and finally Origin Protocol's loss of $7 million.
Number of new Bitcoin addresses spikes amid growing FOMO
Japan's three largest banks, as part of a group of 30 private sector actors, are set to collaborate on an experiment with a digital yen.
Not just Wall Street: Quant trader explains why Bitcoin price is going up
Sam Trabucco, a quantitative trader at Alameda Research, believes four general factors are pushing up the price of Bitcoin.