Japan Preps Tougher Rules on Cryptocurrency Margin Trading

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Cryptocurrency margin trading can be extremely risky for investors. Japan’s uppermost executive body, the Japanese Cabinet, has accordingly greenlighted amendments put forth by the nation’s Financial Services Agency (FSA) that would limit how much leverage domestic crypto margin traders can use.

The FSA had first released a report proposing new rules for Japanese crypto services in December 2018. Therein, the agency called for cryptocurrency margin trading platforms to register with the government and for the imposition of stricter margin limits in these venues.

The Japanese Cabinet has agreed to the FSA’s positions on both fronts, determining last week that platform registrations and tighter margin limits were in order.

Japan Cryptocurrency

The development will bring the country’s crypto margin hubs in line with domestic foreign currency exchange (forex) institutions, which already have to register their operations with the FSA and impose strict margin limits for their traders.

“We intend to motivate operators to do what they can to become registered,” a veteran FSA agent told Nikkei Asian Review.

In a cryptoeconomy where x100 leveraged trades are possible on platforms like BitMEX, Japanese crypto margin trading platforms will now only be able to offer leverage up to four times higher than traders’ deposits.

The novel rules will be officially activated in the spring of 2020, though crypto services will need to have completed the new registration process a year and a half before they’re launched. The amendments come at a time when such trading has boomed in Japan. The self-regulatory Japan Virtual Currency Exchange Association estimates that more than $75 billion USD of crypto margin transactions took place in the country in the final month of 2018 alone.

FSA Flexing Its Might on Crypto

The FSA hasn’t taken a backseat approach to reigning in Japan’s nook of the cryptoeconomy.

Last year, the agency moved to define “crypto assets” and declined at the time to alter its guidelines so as to allow cryptocurrency-based futures and options derivatives to be listed on mainstream Japanese trading exchanges.

However, reporting surfaced in January 2019 that suggested Japan’s top financial regulators were considering whether to allow cryptocurrency exchange-traded funds (ETFs), which would track the price of a crypto asset or assets, to be launched in the country.

Moreover, the FSA admonished the Zaif cryptocurrency exchange for the company’s slow and inadequate response to their platform being hacked last September. A few months prior to that, the agency had ordered six domestic cryptocurrency exchanges to address deficiencies in their respective anti-money launder (AML) systems.

In May 2018, the agency released a five-point framework designed to help cryptocurrency exchanges in the nation bolster their platforms’ security to prevent another devastating hack like was seen in the the Coincheck episode at the start of that year, in which XEM worth $530 million at the time was stolen from one of the exchange’s hot wallets.

In Other Japanese News

Japan is currently one of the globe’s top cryptocurrency hubs, so it routinely has notable crypto headlines unfurling.

One such major and recent headline came from the suspended sentence handed down to former Mt. Gox CEO Mark Karpelès. The Tokyo District Court had found that Karpelès had tampered records in order to obfuscate hacks but hadn’t embezzled any funds from the now defunct exchange.

Earlier this month it was also revealed that major Japanese bank Mizuho was launching a non-cryptocurrency digital currency called the J-Coin. The news came as a blow in the cryptoverse, where rumors had been circulating that the Mizuho money project was going to be released as a cryptocurrency.

Instead, the J-Coin will rely on QR codes to facilitate transactions, much like AliPay, and not on blockchain technology.

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William M. Peaster is a professional writer and editor who specializes in the Ethereum, Dai, and Bitcoin beats in the cryptoeconomy. He's appeared in Blockonomi, Binance Academy, Bitsonline, and more. He enjoys tracking smart contracts, DAOs, dApps, and the Lightning Network. He's learning Solidity, too! Contact him on Telegram at @wmpeaster

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