Japan: Self-Regulating Cryptocurrency Body Proposes Margin Trading Limit on Bitcoin

The regulatory body overseeing Japan's digital currency and trading market introduced a rule that could potentially affect thousands of traders in the cryptocurrency-crazy nation.

As reported by Nikkei Asia Review on July 25, 2015, the Japan Virtual Currency Exchange Association announced a widespread crackdown on the country's margin trading market.

"The self-regulatory body for Japan's cryptocurrency exchanges is firming up plans to set a 4-to-1 leverage limit on margin trading, aiming to reduce the risk of massive losses given the volatility of these assets."

Japan's margin trading market is in line with limits offered by exchanges around the world.

DMM Bitcoin provides a 5x leverage for listed cryptocurrencies, while Zaif goes up to 7.7x. Perhaps the most are offered by GMO Bitcoin, which allows traders to place 10x margin calls on its BTC/JPY trading pair.

At the time, JVCEA stated it should work towards improving transparency across all partner exchanges and explicitly meeting consumer standards observed in Japan's FX, securities, and bonds trading market.

The margin trading limit is presumably one of the steps towards creating a regulated crypto-trading industry.

For the uninitiated, margin trading is the practice of borrowing funds from the broker, in the form of securities, stocks, or cryptocurrencies.

Margin trading applies to both the buying and selling, with the latter called "Shorting" the market.

This tactic allows traders to place trades larger than their account can afford, creating significant opportunities for making massive profits, or in the downside, losing a substantial part of their trading account.