Japanese crypto regulators are making moves to cap how much margin traders can borrow when trading. In a move that some think is overreaching, the Japanese crypto industry is looking to restrict the limit on how much investors can borrow while they are margin trading.
This band of Japanese crypto regulators is a self-regulatory organization that appears to be on a vigilante hunt to get margin traders into line. The newly proposed limit is seen as a great move by some, but not so great in other quarters.
Japanese crypto regulators proposal
The news was collated from a report in the Jiji Press on Tuesday, where the Japan Virtual Currency Exchange Association (JVCEA) recommended that local trading and exchange platforms should propose a limit on how much margin traders can borrow.
If you have ever listened in on margin trading groups on discord or other platforms, it is an extremely risky business where traders can lose their entire crypto portfolios in an instance. It’s not something we would recommend first-time traders to try.
The JVCEA has proposed that margin traders should be restricted to borrowing up to only four times their deposit, to limit the potential loss of individual traders. At the moment of writing, there are no market rules to govern the upper limits of borrowing from crypto investors when margin trading. The Japanese crypto regulators say that the proposed plans are to protect domestic investors.
A plethora of derivative focused market traders
The Japanese are some of the most organized and staunch crypto lawmakers on the planet, and that is not set to stop anytime soon. A study in April by the Japanese watchdog, the Financial Services Agency (FSA), revealed that there were approximately 142,000 crypto traders that were focused on derivatives in 2017, which is just a fraction of the 3 million we now see crypto trading in Japan. However, margin trading is on the increase and needs to be treated with kid gloves by this merry band of Japanese crypto regulators.
The interesting results from the report are that over 80% of all crypto treading volume in Japan last year came from some form of trading in derivatives, totaling a massive USD 543 billion. Out of this figure, a massive 90% are margin traders.
JVCEA was formed last year by Japanese crypto exchanges who have banded together to ‘protect’ the industry, and are seeking to impose rules and regulations in a bid to keep the crypto industry in Japan in a healthy state. It is thought that such a move would lead crypto investors to leave Japanese exchanges, which is also a significant worry for the sector.
The Japanese crypto regulators are planning to hand in a proposal to the FSA in the coming weeks in a bid to curtail borrowing against margin trading. Time will tell if this is a good or bad move for the Japanese crypto scene, or if it will adversely affect the numbers of traders on Japanese trading platforms.
I am very experienced writer/blogger who has been an active member of the cryptocurrency community for several years. I have experience writing for crypto news sites and proactively been involved in the startup of other ICO and crypto ventures over the course of the past four years.