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Japan's FSA to Restrain Crypto Margin Trading

Kristina Frunze | Oct. 26, 2018
Japan's FSA to Restrain Crypto Margin Trading

In the latest news coming from the country of the rising sun, Japan's FSA plans to curb crypto margin trading. As of now, there are no regulations that are specifically managing the cryptocurrency margin trading space in Japan. 

26 October 2018 – Japan's Financial Services Agency (FSA) is reportedly planning to place a cap on the leverage available for cryptocurrency margin trading. This initiative comes as a part of its strategy to limit speculation and risk in the cryptocurrency market. 

Japan limitation for crypto margin trading

As per some of the local news reports, the financial market regulator is mulling the limitation for crypto margin trading. The FSA plans to limit crypto margin traders' borrowing power to two to four times their deposits.

As of the moment, there are no regulations that are specifically managing the cryptocurrency margin trading space in Japan. Cryptocurrency exchanges in Japan are now offering as much as 25 times leverage. This implies that traders can effectively borrow cryptocurrencies that worth up to 25 times the deposit with an exchange. Yet, just a 4 percent fall in the acquired crypto assets would wipe out the initial deposit. 

The report from Nikkei stated that seven out of 16 licensed exchanges by the FSA now offer margin trading services. The report added that a panel comprised of FSA officials and industry experts is now planning to discuss ways to impose potential regulations in this region. 

Japan JVCEA Gets Approval from FSA

The news follows previous statistics that were published by the FSA. That data showed that cryptocurrency margin trading has seen rapid growth in Japan. For example, more than 80 percent of the total cryptocurrency trading volume in Japan during the previous year emerged from derivatives trading. The figure for this volume stood at $543 billion. More than 90 percent of that figure came from margin traders. 

At the beginning of this year, the Japanese Virtual Currency Exchange Association (JVCEA), a self-regulatory body created by the 16 licensed trading platforms in Japan, called for implementing a cap as low as 4 times the deposit. The Chairman of the association, Taizen Okuyama, has stated that time:

"This is just a provisional measure – I don't think a ratio of 4 is adequate.”

Earlier this week, the FSA has officially approved the JVCEA as a "certified fund settlement business association." This implies that the association now has a legal status to oversee local cryptocurrency exchanges. 

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