According to Nikkei, financial regulators in Japan have formulated new regulations for cryptocurrency margin trading. The executive branch of the Japanese government, the Japanese Cabinet, has limited leverage of cryptocurrency margin trading to three times the original deposit.
The newly formulated rules will be enforced by April 2020 and will now require all exchange operators of cryptocurrency to undergo the registration process within the next 18 months. This should enable the government’s Financial Services Agency (FSA) to bring forth the issue of relevant measures when dealing with quasi-operators of cryptocurrency. Margin trading here involves using borrowed funds in order to trade a particular financial asset. This then serves as the collateral for the loan.
Through this move by the government, regulators will now be able to detect those who are operating Ponzi Schemes while protecting the welfare of the other investors. This move also encourages legitimate businesses to explore opportunities for fundraising tools.
After the new regulations have been promulgated, there will be constant monitoring of all entities who deal with cryptocurrency. This is to protect investors and secure traders. The cryptocurrency operators that will be monitored include those who do margin trading and those who issue tokens for ICOs.
Regulating unregistered firms has always been the work of the FSA, especially when it comes to firms that solicit investments in terms of cryptocurrencies. Those doing this will stay in a gray zone when it comes to legality until further notice compared to those that operate under fiat currencies. This is important in order for the cryptocurrency business in Japan to grow but only by the correct rules.