The Cabinet of Japan has reportedly approved draft amendments to Japan’s financial instruments and payment services laws, limiting leverage in cryptocurrency margin trading at two to four times the initial deposit.
Margin trading is the use of borrowed funds from a broker to trade a financial asset, thus forming a collateral for the loan.
The new rules which will reportedly to come into force in April 2020 will require cryptocurrency exchange operators to register within 18 months of that date, which will purportedly enable the Financial Services Agency (FSA) to introduce relevant measures in regard to unregistered cryptocurrency “quasi-operators.”
As a result of this, platforms dealing in cryptocurrency will ostensibly be monitored just like securities traders in order to protect investors. Additionally, cryptocurrency operators will be divided into groups to identify those engaged in margin trading and those issuing tokens through initial coin offerings (ICOs).
With this move, regulators reportedly aim to secure investors from getting caught up in Ponzi Schemes, as well as encourage legitimate companies to practice offerings as fundraising tools.
The FSA also revealed that it was considering the regulation of unregistered firms that solicit investments in cryptocurrencies in January. This is an attempt to close a loophole in the country’s existing regulatory framework, in which unregistered firms that collect funds in crypto rather than fiat currencies remain in a legal gray zone.