Japan to Introduce Strict Rules for Crypto Margin Trading

Wilfred Michael 

Wilfred Michael

News reporter

19 March 2019,
Japan to Introduce Strict Rules for Crypto Margin Trading

Cryptocurrency traders and exchanges in Japan will have new rules to adopt after the country’s parliament on Friday approved adjustments to the financial instruments and payment services law.

According to a Tuesday report by Nikkei Asian Review, the new amendments introduces two significant changes to the Japanese crypto ecosystem, namely:

  • Margin trading, that is, the use of funds borrowed from an exchange to trade on their platform will be capped at two to four times the initial deposit made by the trader. The new limits are in line with margin trading caps for Forex transactions in the country.

  • Exchanges that wish to offer margin trading will have to re-register with the government, allowing regulators to monitor them in the same manner as securities exchanges.

As the report notes, one of the reasons behind the new amendment is the fact that cryptocurrencies are rapidly shifting from an innovative payment method to a speculative tool for investments.

Statistically, Nikkei quotes data from Japan’s self-regulated body of crypto exchanges as showing that margin trading reached 8.42 trillion Yen (approx. $75.6 billion) in December 2018.

Sadly, that figure is roughly eleven times the amount of cryptocurrency to cash transactions on these platforms which stood at 777.4 billion Yen (approx. $7 billion), perhaps highlighting that crypto exchanges could be losing money by offering a high-risk marginal trading option to users.

The new rule also introduces another subtle adjustment that will separate margin trading exchanges from ICOs. Although the report doesn’t mention how the regulators hope to set the distinction, they reckon it as a way to protect investors and allow legitimate projects to explore the fundraising mechanism.

Japan will reportedly implement the new rules in April 2020 while affected exchanges will have 18 months to comply with the directive.

In another crypto related report from Japan, Stmarket.co reported last week that authorities arrested an 18-year old for masterminding a $135,000 theft from a local crypto exchange.


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