Japan introduces new regulations: limiting the leverage ratio of cryptocurrency margin trading

According to a report by the Japanese news agency Nikkei on March 18, the Japanese financial regulator (FSA), a Japanese financial regulator, has introduced new regulations for cryptocurrency margin trading.

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According to reports, the Cabinet of Japan has approved a draft amendment to Japan's financial instruments and payment services laws, limiting the leverage of cryptocurrency margin trading to two to four times the initial deposit.

By definition, margin financing transactions use funds borrowed from brokers to trade financial assets, thereby forming a collateral for loans.

According to reports, the new regulations will take effect in April 2020, requiring cryptocurrency exchange operators to register within 18 months from that date, which is said to enable FSA to take on unregistered cryptocurrency “quasi-operators” Related measures. After the new regulations are promulgated, in order to protect investors, on the surface, entities that trade cryptocurrencies will be monitored similarly to securities dealers. In addition, cryptocurrency operators will be divided into two categories, namely operators engaged in margin trading and operators issuing tokens through ICO.

According to reports, the regulator's move is aimed at ensuring that investors are protected from Ponzi schemes and encourages legitimate companies to issue tokens as a financing tool.

In January of this year, the FSA revealed that it is considering supervising unregistered companies that apply for cryptocurrency investments. According to reports, the move is to fill a loophole in Japan's existing regulatory framework. Under the current regulatory framework, unregistered companies that raise funds in cryptocurrency rather than fiat money are still in the legal grey area.

In August 2018, the FSA Director stated that the agency wanted the cryptocurrency industry to “grow under appropriate regulation” in order to find a “balance” between consumer protection and technological innovation. He pointed out:

“We have no intention of over-inhibiting (encryption industry). We want to see it grow under proper supervision.”