- Margin trading in Japan is to be limited to between two and four times the initial amount
- All firms that deal in crypto trading also need to register by 2020
- This is in an attempt to reduce investor losses and unregistered operators
Not every aspect of cryptocurrency is allowed everywhere in the world and it is not unusual for restrictions to be put in place by governments of countries. ICOs are banned in South Korea, for example, and cryptocurrency as a whole is banned in China.
It would seem that Japan is the latest country to impose some crypto-related restrictions as it was reported on March 18, 2019, that the Cabinet of Japan has reportedly given the green light for draft amendments to Japan’s financial instruments and payment services laws which will limit cryptocurrency margin trading to between two and four times the initial amount.
Play By The Rules
These new rules are expected to come into effect by April 2020 and they will require all crypto exchange operators to register within 18 months of the date. This is to allow the Financial Services Agency (FSA) to take appropriate action regarding ‘quasi-operators’ who are reported to be running unregistered transactions.
A distinction will also be made by the regulators between those that engage in margin trading and those that deal in ICOs for funding raising purposes.
Margin trading is a situation in which an investor takes a loan from a broker to purchase a particular asset for trading purposes and the asset itself becomes the collateral for the loan.
Margin trading has previously been under scrutiny s being a very risky practice as investors are known to sometimes borrow up to 40 Times the value of the asset which makes crypto margin trading particularly tricky considering the volatility of the market.
With this new regulation, margin trading is limited to two to four times the original amount and this is in an attempt to prevent investors from getting caught up in Ponzi schemes and will also foster a market situation where companies may practice offerings as fundraising tools.
Margin Trading in Japan
Margin Trading in Japan is very popular and in 2018, the total amount of margin trading in the country surpassed $75.6 billion, making it 11 times more popular than cash trading.
These new regulations mirror comments made by the commissioner of the FCA in August 2018 when he said that the industry needs to be guided.
“We have no intention to curb [the crypto industry] excessively. We would like to see it grow under appropriate regulation.”