Cryptocurrency exchanges in Japan could soon be facing restrictions on margin trading, Cointelegraph reports on January 13th.
According to a local news outlet, Japan Times, sources in the Financial Services Agency (FSA), Japan's financial watchdog, suggest that there are currently plans to introduce margin trading limits defined as twice the amount deposited in the traders exchange account. The new regulation is reportedly scheduled to go live this spring as Japan Times adds “The new rule will be included in a Cabinet Office order linked to the revised Financial Instruments and Exchange Act which will go into force in spring.”
Margin trading and similar products that enable users to trade at a leverage have become common place in today's financial markets. The appeal of high gains has spilled over into the world of cryptocurrency exchange as well and we can see an increasing number of exchanges offering it on a daily basis. However, the inherent volatility of the base asset makes trading crypto with a leverage an extremely risky strategy. If the new regulation from Japan's regulator proves to be true, it could save a lot of newcomers to the space from the liquidation losses they face as they place trades which border with a game of chance, even though it might not be greeted with the more experienced traders that use margin as a powerful tool.