Japan Introduces Stricter Regulation for Crypto Margin Trading

Japanese regulators have reportedly approved draft amendments to the country's financial instruments and payment services laws, introducing stricter regulations for margin trading of digital assets.A report by local news publication Nikkei Asia Review noted that the amendments will place a cap on available leverage for crypto margin trading, pegging it at two to four times the initial deposit.The report, published yesterday, also claimed that all cryptocurrency exchanges that offer margin trading will have to register with Japan’s Financial Services Agency (FSA) within 18 months of the new rules being implemented in April 2020.Clamping Down on Margin TradingMargin trading is the use of borrowed funds (often obtained from a financial broker or an exchange) to trade a financial asset. The funds borrowed become collateral for the loan, upon which interest is paid.The practice of margin trading for cryptocurrencies has become popular in recent years thanks to its potential for significant returns. Platforms such as BitMEX have offered massive leverage on margin trading, increasing their appeal to investors globally. But the potential high yield from such investments can also come with downsides, including the temptation to make large, risky investments with borrowed funds.Protecting Consumers in a Growing MarketAccording to the report, the new rules will allow Japan to more closely monitor exchanges in a concerted effort to...