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Crypto Exchanges In Japan Will Face Significant Restrictions On Margin Trading

Bitcoin (BTC) and cryptocurrency exchanges in Japan will face significant restrictions on margin trading this Spring, according to reports.

Japan Crypto Exchanges Face Imminent Margin Trading Limits #Altcoin #Japan #CryptocurrencyExchange via — (@Talenter_io) January 11, 2020

It has been reported by Japan Times that the Financial Services Agency (FSA), Japan’s finance regulator, has revealed plans to limit margin leverage to twice the total of traders’ deposits.

However, the move follows on from a limit of four times traders’ deposits which the domestic exchange industry imposed on itself through a self-regulatory body last year.

According to the FSA sources, the reason is to guard against periods of volatility on cryptocurrency markets.

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Likewise, Japan Times added:

“The new rule will be included in a Cabinet Office order linked to the revised Financial Instruments and Exchange Act which will go into force in spring.”

It’s not clear whether the restrictions will take effect immediately following the introduction of the Act or not.

Margin trading can involve significantly larger market moves due to the potential size of the wins or losses, particularly when large numbers of investors engage in the practice at once.

As it has been reported, the tool’s impact has become a cause of controversy for some, who attribute it to manipulation of cryptocurrency price performance.

In October 2019, data showed open interest in margin trading was at an all-time high in Japan.

However, exchanges appeared to at least in part forecast the changes, meanwhile, with Coincheck announcing that it would halt leveraged trading altogether from March.

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Japan has sought to become a friendly jurisdiction for cryptocurrency, fostering permissive regulations and closely monitoring exchanges.

Thus, at the same time, authorities have said that they see no demand for a central bank digital currency, or CBDC, among consumers.

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