Japanese Financial Regulators Approve New Margin Trading Regulations
By Luke Flowers – Cryptocurrency Enthusiast
Japanese regulators have reportedly approved draft amendments to laws on financial instruments and payments services that limit leverage when trading cryptocurrency margins two to four times the initial deposit. Margin trading refers to the practice of borrowing funds from a broker to buy and sell Bitcoin or financial asset which forms the collateral. The trader is then able to use the financial leverage to possibly increase gains but could be subject to increased losses also.
There is an increased risk associated with margin trading, and most are offered through a different account. A trader looking to buy and sell crypto could use this vehicle subject to paying the margin. The margin refers to the amount of money the trader must directly invest from his own resources and can vary depending on the asset. The more volatile the asset the higher the margin is likely to be.
The new rules will see cryptocurrency entities monitored in the same way as security traders for the protection of the investor. Further to this, these businesses will be identified between those that are involved with margin trading and those who offer and sell cryptocurrency through an Initial Coin Offerings (ICO).
Japan is one of the most active countries delving into the crypto space and the new regulations are a move to protect the investor. Japan opted for a self-regulatory association named the Japan Virtual Currency Exchange Association (JVCEA) registered under the FSA back in October 2018. The association is responsible for overseeing operations. An organisation seeking to launch an exchange in Japan to buy and sell crypto or to exchange Bitcoin would need to apply to JVCEA.
Japanese authorities believe the new regulations will entice genuine companies to use the tools for fundraising. Japan is a leader when it comes to the approval and regulation of cryptocurrencies, yet still experiences poor merchant endorsement which stifles adoption.
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