Japan’s financial regulator, the Financial Services Agency (FSA), is planning to place restrictions on cryptocurrency margin trading starting this Spring, local news outlet Japan Times reported on Saturday.
According to the report, the FSA wishes to reduce the risk that comes with cryptocurrency margin trading by lowering the permitted leverage to be only two times the deposit. The new rule will be imposed in a revision to the Financial Instruments and Exchange Act this Spring.
The decision to place the strict limit was made after cryptocurrency regulations in Europe and the U.S. were analyzed, and historical price movements were taken into account. Japan’s Virtual Currency Exchange Association, the country’s self-regulatory body, was also consulted on the creation of the new rule.
Margin trading refers to the practice of using borrowed funds to access greater sums of capital, with the leverage being the multiple of the initial deposit that can be borrowed. While some platforms in the crypto space offer a leverage of over 100x, Japan’s industry is already following a self-imposed rule of setting a maximum of four-times the leverage, which the FSA plans to halve.
Japan has no intention to join the race to be the first nation to release a Central Bank Digital Currency (CBDC), even though China continues to make progress on the development of its own. Last month, authorities in the country said that they see no demand among consumers which will garnish the creation of a digital yen.