Japan releases new Regulations for Margin Trading

March 20, 2019

The financial regulators in Japan have come up with a new set of cryptocurrency regulations that will guide margin trading. The news was reported by the Nikkei news agency on Monday, 18th March. 

According to the report, the Cabinet members, the executive arm of the government has given their approval to the draft amendments. The amendments reached the laws governing payments services and financial instruments in Japan. The new law puts a cap on the leverage in crypto margin trading. The limit set by the cabinet is two –four times the amount of the original deposit.

Before we go ahead, a brief explanation of margin trading is that it is a kind of collateral for borrowing trading funds. It is a situation where a crypto trader may borrow money from a broker to buy a financial instrument.

The areas of focus


The Japan new regulations will take effects from April next year. It will require that all crypto exchange operators register within eighteen months from April 2020. The reason for the time deadline is to help the “Financial Services Agency (FSA)” to complete other relevant details. The FSA will use that period to introduce other necessary measures which will affect the unregistered cryptocurrency operators/quasi-operators

The Japanese Government regulations on crypto will affect other entities in the industry as well. Apart from the margin trading, every entity carrying out one crypto deal or the other will face scrutiny. As soon as the regulatory body enforces the laws, operations in the industry will change. We expect that such moves aim at protecting the investors in the industry.

Further, on the laws, the government will divide cryptocurrency operators into two different groups. The reason easily identifies the traders dealing on margin trading and those issuing tokens through ICO (Initial coin Offering)

Reasons for the new regulations


The regulators hope to protect investors in the crypto industry against frauds. Two of such aims is to ensure that investors don’t fall into Ponzi Schemes. Also, the regulatory body wants to use this move to encourage registered companies to introduce offerings as a way to raise project funds.

Let’s recall that the Financial Services Agency announced that it is planning to regulate the activities of illegitimate firms. Their reason for the interest is that these unregistered firms solicit for crypto investments. Also, they planned to use the development to close the gap in the regulatory framework allowing these firms to operate. The unregistered firms as we gather collect their money in cryptocurrencies instead of using Fiat currencies. As such, the firms remain in Japan’s legal grey area.

Also, in August last year, the Financial Services Agency (FSA) commissioner expressed the concerns of the agency for the industry. According to him, the FSA wants the cryptocurrency community to grow following the proper legal regulations. On why he said this, the commissioner gave two reasons for it. The first reason was that it would protect consumers who operate in the industry. Also, operating under proper government regulations will help the industry to grow technologically.

Although it may seem too stringent, operating the industry under the watchful eyes of the government will protect the players. However, it may reduce the speed at which the industry expands in Japan.   

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