Japan FSA confirms to allow double leverage for cryptocurrency margin trading

Financial Services Agency (FSA) confirms that it has strengthened its policy by doubling the maximum margin (leverage) for cryptocurrency margin trading.

fsa-confirms-to-allow-double-leverage-for-cryptocurrency-margin-trading

FSA has tightened its policy on trading margin assets | Source: Nikkei

FSA policy on “double” leverage for cryptocurrency margin trading

This is the first time a country has set a precise margin ratio for cryptocurrencies. According to the Cabinet Office Ordinance of the Revised Financial Instruments and Exchange Law, this law will take effect in the spring of 2020.

And this is also the first time that a public opinion on the regulation has been proposed and approved.

Until now, JVCEA, a self-regulatory organization authorized by the Financial Services Agency, has established self-regulatory rules to reduce the maximum leverage of cryptocurrencies from 15x to 4x. However, with the amendments to the law this spring, the leverage will have to follow the rules according to the Financial Commercial Code.

The possibility of doubling leverage was pointed out in 2019. Reasons for past gains include a sharp decline in market size and a sense of crisis in business risks, such as a decrease in volume and liquidity.

At the time, industry stakeholders pointed out the following issues when doubling prices:

“If the maximum margin ratio could be reduced to 2x, the number of users who switch to forex with insufficient investor protection will be accelerated. Domestic exchange is mostly limited to the role of a portal of currency buying. Therefore, business activities may become tighter.”

The industry is making recommendations, but the outlook is unclear. Business executives will be forced to respond to the amendment of the Exchange Act and financial instruments next year.

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