The Japan Virtual Currency Exchange Association (JVCEA) wishes to restrict the member exchanges margin trading. According to a report published by a Chinese media on July 24, the news of the plan of Japan’s self-regulatory cryptocurrency body was publicly revealed.
The practice of borrowing money from a broker is called margin trading which is frequently used by traders in order to purchase and sell more cryptocurrency than they can afford by themselves, which intern helps them have an increased potential profit along with the loses.
The JVCEA is yet testing the water regarding its own effectiveness after officially coming into existence earlier this year, they wish to put a limit on the amount margin that traders can borrow and increase their amount to be invested by four times more.
JiJi.com states that “the main aim is to prevent investors from suffering major losses because of sudden fluctuations in prices of virtual currencies, added to which it also stated that the rule can be implemented within a month provided it receives enough support.
A desire to promote trustworthiness as a key element of Japan’s cryptocurrency economy lead to the formation of JVCEA.
Ever since Coincheck lost $534 million in a hack in January 2018, the domestic exchanges have come under severe scrutiny.
Keeping regulatory compliance as a topmost priority for exchanges, the JVCEA further aims at keeping regulators away from being forced to be involved in the market like it was in the case of Choincheck.
Sadly, the teething troubles watched the group lose two of its vice presidents in June, who were both CEOs of the exchanges, facing adherence demands from the country’s Financial Services Agency (FSA).