Japan to implement new rules for cryptocurrency margin trading

The Cabinet of Japan has approved draft amendments to the country’s financial instruments and payment services laws, which will introduce new regulations for cryptocurrency margin trading, Nikkei reported.

The rules, which are expected to go into force in April 2020, will cap leverage in cryptocurrency margin trading at 2 to 4 times the initial deposit. The new limits are aligned with the standards applicable to foreign exchange trading.

The previous registration requirements which came into effect with the Payment Services Act aimed at preventing money laundering.

The new rules will bring crypto exchange operators under regulatory supervision, similar to securities traders to protect investors. They will also categorize cryptocurrency operators to distinguish those that offer margin trading from those that issue tokens in initial coin offerings (ICOs).

Those crypto exchanges that offer margin trading would be required to obtain new government registration within 18 months of the date the regulations come into effect. Brokerages might be required to re-register for this purpose.

The time limit would enable the Financial Services Agency (FSA) to better equip itself to address the unregistered cryptocurrency "quasi-operators." In case the screening process takes time, these quasi-operators would be allowed to do business in the meantime.

"We intend to motivate operators to do what they can to become registered," said a senior FSA official.