Japan Plans Stricter Rules on Speculative Crypto Trade

 In Exchanges, Governments and Regulations

The Japanese market regulator said it plans to revise its rules to check speculative crypto trading for better protection of digital currency users.

Japan’s financial market watchdog is reportedly considering stricter rules on Bitcoin and digital currencies to curb speculative investments after the massive attack on Tokyo-based cryptocurrency exchange operator Coincheck, which resulted to nearly $600 million in losses.

According to The Japan Times, the sharp rise in Bitcoin and digital currency value has attracted speculative investments in the space, making it necessary for the Financial Services Agency (FSA) to impose rules to address the growing trend.

“Young users who had previously no connection (with cryptocurrencies) have increased at a breathless pace,” an official at a major exchange operator told the news outlet.

Japan’s FSA date showed growing popularity of cryptocurrency trading among its citizens, with more than 3.5 million digital currency traders in 2017, generating an estimated turnover of $97 billion.

Digital asset payments in Japan are gaining popularity as alternatives to legal tenders despite their limitations but a majority of the transactions are focused on capitalizing on generated profits.

Observers attribute the rapid rise in cryptocurrency investments to the increase in margin trading, which allows investors with little capital the capability to earn huge gains but also to suffer extensive losses. Although the foreign exchange margin trading offers 25 times more leverage limit, the lack of such a cap on digital currency margin trading exposes investors to wild financial swings because of the speculative nature of digital asset trading.

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An official at FSA noted that these trading platforms remain unchecked since virtual currencies are outside the control of the Financial Instruments and Exchange Act, which defines rules on anti-insider trading and other market regulations.

For several years, the FSA has anchored its regulatory functions on the Payment Services Act (PSA) which covers integrated circuit cards issued by the country’s transport service providers.

But in April 2017, the government revised it in a bid to protect cryptocurrency users by introducing rules on registration for crypto dealers who exchange digital assets with yen and other legal tenders. With the revision, the PSA now covers a wider spectrum of the cryptocurrency remittances and payments.

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