FSA – Japan’s Financial Services Agency is thinking to place a cap on the leverage accessible for crypto margin trading to minimise speculations and the associated risks.
In line with a recent news report by ‘Nikkei,’ the financial market regulator [FSA] is considering limiting crypto margin traders’ borrowing power to 2 to 4 times their deposits.
Currently, there are not any rules specifically governing the cryptocurrency margin trading in Japan, the report stated, with exchanges offering a maximum of twenty five times leverage. Which simply means that the traders could effectively borrow cryptocurrencies worth up to twenty five times the deposit with an exchange, but simply a 4% drop in the purchased crypto assets would wipe out the initial deposit.
Nikkei aforementioned that seven of the sixteen authorised exchanges by the FSA currently offer margin trading services, adding that a panel comprised of FSA officers and industry specialists is presently set to discuss ways to impose potential rules within this space.
The news follows previous statistics disclosed by the FSA, that indicated cryptocurrency margin trading has seen a rapid growth within Japan. As an example, over 80% of the overall cryptocurrency trading volume in Japan 2017 came from derivatives trading, that recorded $543 Bln. Over 90% of that figure came from margin traders.
Earlier this year, the Japanese Virtual Currency Exchange Association [JVCEA], a self-regulatory body founded by the sixteen authorised trading platforms in Japan, pushed for setting a cap as a low as four times the deposit.
The chairman of the association ‘Taizen Okuyama,’ was quoted saying:
“This is simply a tentative measure – i don’t assume a ratio of four is adequate.”
Even just yesterday, the FSA formally approved the JVCEA as a “certified fund settlement business association,” that simply means it currently has legal status to police domestic crypto exchanges.