Japanese Regulators Introduces New Regulations for Crypto Margin Trading

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According to local news agency Nikkei, Japanese financial regulators have reportedly introduced new regulations for digital currency margin trading.

The cabinet of Japan has passed draft amendments to Japan’s financial instruments and payment services laws, restricting leverage in digital currency margin trading at two to four times the initial deposit.

Margin trading is the use of borrowed funds from a broker to trade a financial asset, thus forming collateral for the loan.

The new rules which are reportedly to come into force in April 2020 will require digital currency exchange operators to register within 18 months of that date, which will allow the Financial Services Agency (FSA) to introduce relevant measures in regard to unregistered digital currency “quasi-operators.”

After the promulgation of the new regulations, entities dealing in the digital currency will apparently be monitored similarly to securities traders in order to protect investors. Additionally, digital currency operators will be split into groups to identify those engaged in margin trading and those issuing tokens through initial coin offerings (ICOs).

With this move, regulators intend to secure investors from getting caught up in Ponzi Schemes and encourage legitimate companies to practice offerings as fundraising tools.

In January 2019, the Financial Services Agency (FSA) revealed that it was considering the regulation of unregistered firms that solicit investments in digital currencies. The development is a bid to close a loophole in the nation’s existing regulatory framework, in which unregistered firms that collect funds in digital currencies rather than fiat currencies remain in a legal gray zone.

Back in August 2018, the commissioner of the FSA stated that the agency wants the digital currency industry to “grow under appropriate regulation” to find the “balance” between customer protection and technological innovation, noting:

“We have no plan to control the cryptocurrency industry excessively. We would like to see it develop under appropriate regulation.”