Japan’s Financial Services Agency intends to implement a new rule that would place limits on leverage in digital asset margin trading, The Japan Times reports. The Times’ sources confirmed that the rule will be inserted in the language of a new Cabinet Office order related to changes in the country’s Financial Instruments and Exchange Act.
The new regulation would limit leverage used in such trades to no more than two times any trader’s deposits. As the Times notes, the rule will be much tougher than the industry’s current self-regulated standard, which limits leverage to four times a trader’s deposits. The change is intended to mitigate potential losses that might occur due to price volatility in the markets and was at least partly influenced by regulatory actions in the U.S. and Europe.
The FSA had reportedly discussed the issue with the Japan Virtual Currency Exchange Association last year. Now, the association will need to consider how to best comply with the regulatory changes:
The association plans to review its rules to reflect the new regulation. Exchange operators are expected to be pressured to alter their business models as the new regulations may lead speculative traders to lose interest in cryptocurrency margin trading.