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Japan's FSA Looking To Limit Crypto Leverage Option to Only Twice The Deposited Amount

Prashant Jha by Prashant Jha - 10:26 AM Jan 13, 2020
Japan's FSA Looking To Limit Crypto Leverage Option to Only Twice The Deposited Amount

Japan's Financial Service Agency is planning to amend the laws for cryptocurrency margin trading and would allow the leverage to be only 2X the deposited amount by the trader, reported The Japan Times. The earlier self-imposed law allowed for 4X leverage on the deposited amount and the move is being seen as a cautious measure to avoid losses in the highly volatile crypto market.  Reports suggest the new leverage limit was determined after studying the margin trading trends around the globe and especially in the European and American markets. The newly made amendments to the crypto margin trading rules would be included in a Cabinet office order and come into force in the coming spring.

The Increasing Use of Crypto For Margin Trading Puts Traders at Risk

Many governments are looking to or have already regulated crypto positively in their respective countries in the hope of promoting crypto adoption and use. However, reports suggest that most of the people are using these cryptocurrencies for margin trading to make quick money. However, due to the volatile nature of cryptocurrencies which often rise and fall in double digits leads to heavy losses for these margin traders.

The FSA arrived on the decision to lower the leverage rates after taking in inputs from the Japan Virtual Currency Exchange Association and they are planning to review their existing rules to incorporate the new changes. The numerous crypto exchanges also need to formulate new business models to attract the traders as they fear the lowering of leverage rates might lead to traders losing interest in margin trading.

Japan is one of the leading countries when it comes to friendly crypto regulations and adoption and was among the first ones to legalize crypto trading. Japan has also been tasked to help other G-20 nations in formulating friendly crypto regulations in the country.

About The Author
Prashant Jha

Prashant JhaAn engineering graduate, Prashant focuses on UK and Indian markets. As a crypto-journalist, his interests lie in blockchain technology adoption across emerging economies.

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