Japan: Self-Regulating Cryptocurrency Body Proposes Margin Trading Limit on Bitcoin 🚨 This article is 6 years old...
Japan: Self-Regulating Cryptocurrency Body Proposes Margin Trading Limit on Bitcoin
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Updated: Sep. 9, 2018 at 7:13 pm UTC
Photo by Ash Edmonds on Unsplash
The regulatory body overseeing Japan’s digital currency and trading market introduced a rule that could potentially affect thousands of traders in the cryptocurrency-crazy nation.
Regulating Crypto, One Step a Time
As reported by Nikkei Asia Review on July 25, 2015, the Japan Virtual Currency Exchange Association (JVCEA) announced a widespread crackdown on the country’s margin trading market. The move applies to all registered cryptocurrency exchanges, including bitFlyer, Quonine, and DMM Bitcoin.
The report noted the move was still a proposal for members exchanges to accept, in addition to a one-year grace for those who opt-out.
As stated in the report:
“The self-regulatory body for Japan’s cryptocurrency exchanges is firming up plans to set a 4-to-1 leverage limit on margin trading, aiming to reduce the risk of massive losses given the volatility of these assets.”
Japan’s margin trading market is in line with limits offered by exchanges around the world. For example, DMM Bitcoin provides a 5x leverage for listed cryptocurrencies, while Zaif goes up to 7.7x. Perhaps the most are offered by GMO Bitcoin, which allows traders to place 10x margin calls on its BTC/JPY trading pair.
JVCEA’s Regulatory Push
The JVCEA was officially formed on April 23, 2018, after 16 of the country’s top exchanges joined hands to protect investor interests and curb money laundering. While the body is self-regulating and strictly imposes rules on members, it operates outside of Japan’s legal frameworks, remaining committed, yet wholly-independent, towards building a responsible exchange industry in the crypto-friendly country.
The association came into being after Coincheck’s infamous hack in January 2018, which saw nefarious actors steal $534 million worth of NEM tokens from the young exchange.
At the time, JVCEA stated it should work towards improving transparency across all partner exchanges and explicitly meeting consumer standards observed in Japan’s FX, securities, and bonds trading market.
Despite its enterprising ideas, the association is still experimenting with various aspects of the dynamic cryptocurrency market. Strict action or regulations are yet to be introduced. However, the margin trading limit is presumably one of the steps towards creating a regulated crypto-trading industry.
Margin Trading Hurdles
For the uninitiated, margin trading is the practice of borrowing funds from the broker, in the form of securities, stocks, or cryptocurrencies. Margin trading applies to both the buying and selling, with the latter called “shorting” the market.
This tactic allows traders to place trades larger than their account can afford, creating significant opportunities for making massive profits, or in the downside, losing a substantial part of their trading account.
Speaking of the development, the group stated:
“It aims to prevent investors from suffering a lot of losses due to sudden price fluctuation of the virtual currency. [We] plan to enact the rule within a month if it gained support.”
The JVCEA seems primed to create a favorable, and secure, market for cryptocurrencies, presumably to prevent government intrusion – which could be far more severe actions taken.
Not all is smooth for the group, however. In June 2018, two founding vice-presidents left the JVCEA for unstated reasons but were reportedly facing non-compliance allegations for their respective exchange businesses from Japan’s Financial Services Agency (FSA).
