The primary financial regulator in Japan is considering putting a cap on the amounts of funds that can be borrowed by investors for trading with cryptocurrencies. This particular news was leaked to the press by reliable sources who are close to the financial regulator. There have been a number of signs and comments that have been showing that this is about to happen.
The main reason why this is about to happen is that Japan hopes to minimize the volatility risks for the investors. Because of this the Financial Services Agency (FSA) has considered to put caps so that there can be effective and recognized limits. Currently in the Japanese markets there are no caps.
Because of lack of caps there are certain exchanges that provide traders with up to twenty five times the deposits they make as leverage. There are speculations on the caps to be put by the financial regulator. It is expected that the limits that will be put will not go beyond four times. There are even speculations that the caps will allow just two times the deposit. Consequently, traders dealing with any cryptocurrency will just be able to get two times their deposits as leverage.
According to data from FSA there are more than 3.5 million cryptocurrency traders in Japan. Majority of these traders are aged between twenty and forty. The annual domestic trading in bitcoin rose from $22 million in the year 2014 to $97 billion in the year 2017. Most people traded coins through the blockchain with an objective of making profits. But still there are traders who keep the coins with an objective of the value increasing. Every digital currency that is traded in japan has proven to be popular where traders are interested in trading especially with the new cryptocurrencies.
The financial regulators argue that if caps are not put in place the investor will be exploited as time progresses. According to reports from reliable sources the seven of the sixteen cryptocurrency exchanges that are licensed in japan provide margin trading platforms. Coincidentally, a body that represents the sixteen exchanges that are licensed had already enforced a four to one limit on the margin of trading. But according to the chair of the Japan Virtual Currency Exchange Association (JVCEA) this was just a provisional measure. Without an officially recognized limit there will be no effective way of controlling the limit.
This is the primary reason why any cryptocurrency that hopes to have an ICO needs to have met the necessary requirements. When the caps are put in place it will be able to provide the investors with the necessary protection from exploitation.
There has been no official time limit for when the caps will be put in place. But most people who are close to the market expect that the caps to be in place within the next two months. FSA needs to consult all the players so there can be an agreement. The consultation will mainly involve the limits and the ratios which are to be applied. But regardless of the consultations and how long they will take it is almost certain that these caps will be put in place in the near future.