Japanese Cryptocurrency Exchanges Plan Limits on Borrowed Margin Trading

Japan’s primary self-regulatory body for cryptocurrency exchanges is finalizing a proposal to enforce a limit on the amount of funds investors can borrow for margin trading of cryptocurrencies.

The Japan Virtual Currency Exchange Association (JVCEA) is proposing a 4-to-1 limit on margin trading wherein investors will only be allowed to borrow up to four times their original deposit, Nikkei reported Thursday.

The proposed plan, the JVCEA explained, is to limit the risk of losses faced by investors in a relatively volatile market that sees no restrictions on margin trading borrowing at the present time. The report further revealed that some domestic exchanges a leverage limit of up to 25-to-1, the default upper limit margin for foreign exchange trading.

The body is also considering exceptions under certain conditions such as effecting default circuit-breaker mechanisms based on market conditions.

While Japan’s Financial Services Authority (FSA) has taken an hands-on…