Japan Sets New Regulations for Virtual Assets Margin Trading

Dennis Wafula

March 19, 2019

Well, it is quite evident that Japan has the most progressive regulatory climate for cryptocurrencies. In 2018, the Financial Services Agency (FSA) commissioner stated that the agency wants the crypto industry to ‘’grow under the right regulation’’ so as to find the balance between consumer protection and technological innovation.

“We have no intention to curb [the crypto industry] excessively. We would like to see it grow under appropriate regulation,” he stated.

Earlier this year, the Japanese regulators sought to curtail highly leveraged crypto derivatives trading and re-define ‘virtual currencies’ as ‘crypto assets’. With this move, the FSA was considering the regulation of unregistered firms investing in crypto coins.

Today, the Japanese financial regulators have introduced new regulations for cryptocurrency margin trading. Reportedly, the Cabinet of Japan, which happens to be the executive branch of the country’s government, made an approval over the draft amendments to Japan’s financial instruments as well as payment services laws.  This approval pegs leverage in digital currency margin trading at 2-4 times initial deposits.

How the New Regulation Work

Apparently, all crypto exchanges dealing with margin trading need to obtain new government registration which will be separate from the existing registry that has focused on cash platforms since 2017. This will in return allow the FSA to introduce pertinent measures when it comes to unregistered cryptocurrency operators.

All crypto operators in Japan will be sectioned into groups so as to determine those who issue tokens via Initial Coin Offerings (ICOs) and those engaged in margin trading. This move also aims to encourage legitimate companies to practice offerings as fundraising tools as well as secure investors from getting caught up in Ponzi Schemes.  This new rules are to be enforced as from April next year. All margin crypto operators will need to be registered within 18 months before April 2020, whereas the already established brokerages intending to enter the crypto world will need to get re-registered.

“We intend to motivate operators to do what they can to become registered,” a senior FSA official stated.

A few examples of platforms that are operating despite not being on the existing registry include the Tokyo crypto exchange, LastRoots and the Bitcoin platform Rakuten Wallet.

Crypto is Coming!