According to reports from local media on Wednesday, the Japan Virtual Currency Exchange Association (JVCEA) plans to impose a leverage limit for crypto margin trading. The aim is to protect investors.
The association, which comprises all of japan’s 16 government-approved crypto exchanges, was created to rebuild public trust in the crypto space after Coincheck was hacked in January.
Nikkei reported on Wednesday that one of the self-regulatory measures the association has been working on include “an across-the-board cap on the extent to which traders can use borrowed funds to magnify gains and losses,” adding: “The self-regulatory body for Japan’s cryptocurrency exchanges is firming up plans to set a 4-to-1 leverage limit on margin trading, aiming to reduce the risk of massive losses given the volatility of these assets.”
“The measure would take effect after a one-year grace period. The organization is considering allowing exceptions if exchanges meet certain conditions, such as implementing automatic stop-loss mechanisms,” the publication detailed. With the volatility of crypto trading, “some highly leveraged cryptocurrency investors in Japan have suffered heavy losses, spurring criticism from consumer protection groups.”
Even though the association has not yet confirmed its plans, the news outlet wrote that the “draft rules also include bans on insider trading and dealing in cryptocurrencies suspected to be used in money laundering.”
Six among the 16, members of the association, received last month, business improvement orders from Japan’s top financial regulator: the Financial Services Agency (FSA). Representatives director of Bitflyer and Bitbank Corporation, Yuzo Kano and Hiroyuki Noriyuki, resigned from their positions as vice presidents of the association, to focus on their exchange businesses.
Each crypto exchange in Japan has its own limit for margin trading.
“You can choose leverage from 1x to 7.77x, according to your trading style,” Zaif, operated by Tech Bureau, wrote on its website.
Nikkei elaborated further, and said: “Japan currently lacks limits on cryptocurrency margin trading…Some exchanges permit leverage of up to 25 times the deposit, citing regulations, setting that as the ceiling for foreign exchange trading.”