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Japanese Crypto Exchanges Might be Left Without Their Golden Goose

Tim Alper
Last updated: | 1 min read

Japan’s cryptocurrency community could be set for a shock following reports that the government is likely to accept regulatory proposals that would see leveraged trading caps slashed by 50% at the country’s crypto exchanges.

Source: iStock/jeancliclac

Per a number of leading Japanese media outlets, including Nikkei on Friday and Jiji (via the Japan Times) over the weekend, unnamed sources have confirmed that the regulatory Financial Services Agency (FSA) wants to reduce leverage limits in margin trading to twice customers’ deposits.

Leveraged trading is the main money-spinner for the vast majority of Japan’s exchanges, with Jiji estimating that it makes up some 90% of all transactions on crypto platforms in the country.

The sources told media outlets that FSA has informed Tokyo of its intentions, and the agency is likely to seek comment on its proposal before the end of the month.

However, should the FSA get its way, the Japanese cabinet may rubber-stamp the proposal as early as next month, with the measure enshrined into law during parliament’s Spring 2020 session.

The FSA’s reasoning behind the shock move is reportedly a willingness to “reduce the risk of losses due to excessive speculation and cryptocurrency price volatility.”

Regardless, many will be shaken by the news, with the measure coming just months after the self-regulating Japan Virtual Currency Exchange Association (JVCEA) imposed a x4 leveraged trading cap.

The JVCEA’s move in May last year was thought to have been made with the blessing of the FSA. Forex trading platforms, meanwhile, have leverage trading caps of up to x30.

Media outlets agree that should the FSA’s proposal become legally binding, a number of Japanese exchanges will need to “change their business models” – or risk financial oblivion.