Financial Services Agency to limit leverage in cryptocurrency margin trading to twice th…

The Financial Services Agency plans to introduce a rule limiting the leverage in cryptocurrency margin trading to twice the deposits of traders, it was learned Friday.

The regulation, which is stricter than the industry’s self-imposed cap of four times, will be established to reduce the risks of losses ballooning due to volatile price fluctuations.

The new rule will be included in a Cabinet Office order linked to the revised Financial Instruments and Exchange Act which will go into force in spring, informed sources said.

Cryptocurrencies have been hailed as the payment method of the future partly thanks to their low remittance fees. But the actual use has not reflected these expectations.

Some 80 to 90 percent of the transactions via cryptocurrency exchanges are speculative margin trading.

The FSA discussed leverage regulation with an industry body, the Japan Virtual Currency Exchange Association, after the revised law was passed by the Diet in May last year.

The agency has…