Japan which is already well known for its stringent crypto regulations is about to add another set of rules. According to a recent report, the country is about to cap leverage trading on cryptocurrencies by 2020.
Leverage Trading on Cryptocurrency Exchanges to Get Capped
Japan’s top financial watchdogs have reportedly approved amendments to the country’s financial instruments and payment services laws designed to limit the amount of leverage cryptocurrency exchanges are allowed to offer their users when margin trading.
This newly amended cap is expected to be two-to-four times the trader’s initial deposits. This is similar to the rules governing foreign exchange (forex) trading portals
Also, all cryptocurrency exchanges offering margin trading to their users must now seek approval from the Japanese government through registration. This is going to be a new form of registration process, which is different from the preexisting process signed into law in the year 2017. Then,
digital currencies were officially recognized as legal tender.
These amendments are going to force crypto exchanges to accept monitoring which is similar to those governing security exchanges and traders. This move to amend the existing regulations stems from the increase in speculative trading on margin.
The Japan Virtual Currency Exchange Association reportedly revealed that Japan recorded 8.42 trillion yen in total margin trading in December of last year. This is said to be approximately 11x the total amount of cash transactions.
Rules to Take Effect in April 2020
The newly amended rules are not going to take effect immediately, however, they are expected to get implemented in April 2020. Furthermore, “exchange operators would need to be registered within 18 months of that date.”
Since the hack of roughly 500 million NEM (XEM) coins worth half a billion dollars from Coincheck, Japan has become stern when it comes to regulating the crypto industry. The event has also made the country’s Financial Services Agency vigilant when it comes to protecting its citizen’s investments.