Japan Announces New Rules for Margin Trading of Cryptocurrencies

According to domestic news bureau Nikkei, Japanese financial regulators have supposedly announced new digital currency margin trading regulations. The Japanese Cabinet, the judicial branch of the country’s government, has supposedly endorsed draft proposals to Japan’s financial instruments and payment services laws, restricting the financial leverage to between two and four times the amount held in cryptocurrency margin trading account.

Margin trading makes use of funds borrowed from broker to buy and sell a financial instrument, thus creating a surety for the borrowed sum. The new laws— which are expected to become effective in April 2020— will necessitate digital currency companies to sign up within 18 months from the aforementioned date, supposedly enabling the Financial Services Agency (FSA) to implement pertinent reforms for unlicensed “quasi-operators” of cryptocurrencies.

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

With this initiative, regulators are supposedly aiming to safeguard investors from being trapped in Pyramid schemes, as well as motivate credible firms to use products as tools for fundraising. The FSA divulged in January that it was contemplating regulating unlicensed firms asking for investment in digital currencies. The advancement is supposedly an attempt to plug a loophole in the prevailing regulatory framework of the country, where firms which are not registered and raise funds in crypto instead of fiat currencies persist in a legitimate murky area.

The FSA commissioner said back in August 2018 that the organization wants the cryptocurrency sector to “grow under adequate regulation” to find the “balance” between consumer rights and technological development, noting:

“We have no intention to curb [the crypto industry] excessively. We would like to see it grow under appropriate regulation.”