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Japan to set a limit on leverage for margin trading of cryptocurrencies

Japan to set a limit on leverage for margin trading of cryptocurrencies

Cryptocurrency exchanges in Japan will face significant restrictions on margin trading this spring.

According to sources Japan Times
at the financial services Agency of Japan (FSA), the regulator plans to reduce the leverage limit to 2x on margin trading. In 2018, local cryptocurrency exchanges established
the leverage limit is up to 4x via the Japanese cryptocurrency Exchange Association (JCEA).

The reason for the planned restriction, according to sources in the FSA, is to protect investors during periods of volatility in the cryptocurrency markets. Regarding the timing of the restriction, the Japan Times publication States:

“The new rule will be included in the order of the Cabinet of Ministers related to the revised law on financial instruments and exchanges, which will come into force in the spring.”

It is unclear whether the restrictions will take effect immediately after the new version of the Law is submitted. Recall that in the summer of last year, it was already reported
about the FSA’s plans to tighten regulation of cryptocurrency exchanges and margin trading. The updated law, among other things, does not define “virtual currency” – it is replaced with a more comprehensive term “crypto assets”.