Japan, which is considered to be the most crypto-friendly country in the world has just passed a new crypto regulation to its upper house of the National Diet.
According to local news, the regulation will be implemented within the next couple of months, for better controlling the cryptocurrency trading market. It is understandable, as many Japanese investors have fallen for crypto scams on several occasions for the past year, and amendments were necessary to lower the numbers.
A new type of crypto trade
The amendments will also address the growing number of crypto exchanges offering margin trading on digital assets, which bring cryptos extremely close to traditional trading tools. The amendment will be spearheaded by the local Financial Instruments and Exchange Act and Payment Services Act.
Another major change for the Japanese market will be the alteration of the terminology. According to the reports, cryptocurrencies will no longer be called “virtual currencies”, but be referred to as “crypto assets”.
Long time in development
The Japanese crypto enthusiasts have been expecting the implementation of the new cryptocurrency regulation for over 2 months now, as it was first teased in March 2019. The news got out when the Cabinet of Japan approved the amendments to Japan’s financial instruments and payment services law.
It is quite similar to ESMA regulation in Europe, as it limits the available leverage and margin on crypto trades.
Although leverage was doing wonders for market growth in terms of traded volume, it was also creating dangerous situations for traders in a volatile market.
As we all know, a 50% fall ar rise in price within a single day is quite realistic for cryptos. And when traders have a $1,000 open position with 1:30 leverage, it can do some serious damage to their portfolio.
It is most likely that the leverage cap will be reduced to either 1:5 or 1:2.