Japan’s self-regulatory body proposes a 1:4 cap for crypto exchanges leverage limits

The self-regulatory body in Japan, the Japan Virtual Currency Exchange Association (JVCEA) is proposing a change in the current leverage limit for cryptocurrency exchanges. Leveraging is a service offered by both foreign exchange and crypto exchanges; it allows the traders to make bigger profits. However, the service can also lead to a multiplication of losses.

Leveraging is used by many foreign exchange brokers, but many regulators around the world view this method as being illegal to some extent. Therefore the regulatory authorities have introduced caps to limit the extent of the leverage. For Japan, the cap is 1:25 while the cap for both the United States and the United Kingdom is 1:50.

Leveraging is not common in the cryptocurrency world, however, but it is available on some cryptocurrency exchanges. Quoinex has a leverage of 1:25 according to Cryptovest. Crypto trading in Japan continues to grow with each passing year. The Financial Services Agency (FSA), according to Finance Magnates reported that the citizens in the country have at least $3.5 million in digital assets. The Finance Magnates reports that:

“The JVCEA is proposing a cap of 1:4, which means that customers would be able to bet a maximum of four times the amount of money that they actually put in. The measure would take effect after a one-year grace period, and if an exchange decides to set its rate independently of the guidelines it would be obliged to report any losses beyond the amount deposited by the relevant customer.”

The JVCEA was established in April and it includes various companies with cryptocurrency-related businesses. It also brings together the Japan Blockchain Association and the Japan Cryptocurrency Business Association. It is made of sixteen crypto exchanges that have been licensed by the FSA.