The Japanese financial authorities have announced an expansion of the already pioneering rules for cryptocurrency trading to effect further order to one of the world’s biggest virtual currency marketplaces. It was approved by the cabinet last Friday, March 15, 2019, with the draft revisions to Japan’s financial instruments and payment services laws. It would cap leverage at two to four times initial deposits in virtual currency margin trading. The new restriction is in line with standards that are similar to those in foreign exchange trading.
All cryptocurrency exchanges that manage margin trading will be obliged to get new government registration. It will be separate from an existing registry that concentrated mainly on cash platforms devised in 2017 which is part of a first-of-its-kind legal framework that acknowledges cryptocurrency as legal tender.
Cryptocurrencies once enjoyed bright possibilities as an advanced payment method, but their application in uncertain trading has far exceeded this. The total margin trading in Japan reached 8.42 trillion yen r equivalent to $75.6 billion in December 2018 based on Japan Virtual Currency Exchange Association, recognized as a self-policing body. That is approximately 11 times the measure of cash transactions, which seemed to 777.4 billion yen.
The lack of balance has left some investors with paper diminution. Initial registration requirements, imposed by the Payment Services Act, were given out to avoid money laundering. These new rules will need that cryptocurrency exchange operators be observed in a process comparable to securities traders to protect investors.
Moreover, cryptocurrency operators will be arranged into categories to identify those that involve in margin trading from those that given tokens in initial coin offerings, for example. It is designated to protect investors from objectionable offerings that more nearly resemble Ponzi schemes, and to support more legitimate companies to apply offerings as fundraising tools.
The rules will be strictly implemented into authority in April 2020. Margin cryptocurrency exchange operators would require to be registered in 18 months of that date. Big-name brokerages searching to enter the game would likely need to re-register for that goal.
The time limit would provide the Financial Services Agency tools to crack down on unregistered “quasi-operators” that trade in cryptocurrency while their registration applications are anticipating approval. Tokyo crypto exchange LastRoots is presently running notwithstanding not being on the existing registry like the Rakuten Wallet, a Bitcoin platform owned by e-commerce provider Rakuten.
If the screening method drags on, the quasi-operators typically can do business like their registered peers in the meantime. They plan to urge operators to do what they can to become registered as was said by a senior FSA official.