To better protect investors, the Association of Japanese cryptocurrency exchanges JVCEA plans to impose a strict limit on leverage that it offers for margin trading.
Japan Virtual Currency Exchange Association (JVCEA) was created after hacking Coincheck in order to restore public confidence in the cryptocurrency space. The Association is working on self-regulation. All members 16 of cryptocurrency exchanges was approved by the government of Japan.
On Wednesday local media reported that JVCEA going to set a limit of leverage for the cryptocurrency margin trading to protect investors. According to Nikkei, the proposed rules include a «comprehensive a fixed limit on the extent to which traders can use leverage to control profit and loss». In addition, the article notes:
«On the self-regulation of cryptocurrency exchanges in Japan finalizing plans to establish the limit of leverage of 4 to 1 on the margin trading. This is aimed at reducing the risk of large losses, given the volatility of these assets. The measure will take effect following the annual deferral. The organization is also considering the possibility of permit exemptions if the exchange meet certain criteria, such as the introduction of automatic mechanisms stop loss».
Considering the volatility of cryptocurrency «some cryptocurrency investors of Japan suffered considerable losses because of the large leverage that has drawn criticism from groups for the protection of consumers,» says the publication.
Although the Association has not confirmed its plans to publish the publication noted that «the project also includes the prohibitions on insider trading and transactions in the cryptocurrency, allegedly carried out for money laundering».
Last month six of the sixteen members of the Association received orders to make changes in their work from the main financial regulator of Japan — financial services Agency (FSA). Subsequently, the authorised Directors of companies Bitflyer and Bitbank Yuzo Kano (Yuzo Kano) and Noriyuki Hiroyuki (Hiroyuki Noriyuki) who acted as Vice-presidents of the Association, resigned to focus on their exchanges.
Each cryptocurrency exchange, Japan sets a limit on margin trading. DMM Bitcoin, cryptocurrency exchange giant e-Commerce DMM Group, for example, offers a 5-fold leverage. Exchange Zaif offers leverage to 7.77. «You can choose the leverage from 1 to 7.77 in accordance with your trading style,» said the exchange on its website.
GMO Coin, a subsidiary of Japanese Internet giant GMO, offers a 5-fold and 10-fold leverage for the pair BTC/JPY. However, for margin trading of ETH, BCH, LTC and XRP vs JPY offered only 5-fold leverage. Bitpoint offers a shoulder 2, 5, 10 and 25 for the BTC/JPY, BTC/USD, BTC/EUR and BTC/HKD. Platform Lightning Bitflyer allows the shoulder to 15.
In the publication the Nikkei is specified:
«In Japan are currently not enough restrictions on margin trading cryptocurrencies. Some exchanges provide the leverage to 25, referring to the rules that establish this limit for trading any foreign currency.»