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The Japanese Cabinet, which is the executive agency of the country’s government, has recently approved new draft amendments that would limit cryptocurrency margin trading to two-to-four times the initial deposit.
An additional requirement of the proposed law is that all cryptocurrency exchanges offering margin trading within the country would have to register within 18 months of the law becoming effective. This registration would be in addition to other registration requirements that already exist, such as KYC/AML laws, capital requirements, and audit regulations.
Margin trading within Japan was around 8.42 trillion yen ($75.6 billion) in December 2018, which was around 11 times more than the 777.4 billion yen ($6.9 billion) in crypto-cash conversions. The proposed law also intends to separate margin trading from ICOs in order to better protect investors and consumers from Ponzi schemes.
Increasing cryptocurrency regulations
Japan’s Financial Services Agency has previously issued laws against Zcash, Monero, and Dash, classifying them as privacy coins and fearing money laundering and other criminals utilizing their attributes. While this is not the majority of the reasons these cryptocurrencies are used, this has not stopped regulations from being handed down. Japan has been one of the top countries for cryptocurrency regulations after the collapse of Mt. Gox, but other governments around the world have also been issuing laws around cryptocurrencies in the proclaimed effort “to protect consumers”.
Margin trading becomes problematic when traders become over leveraged, particularly with borrowed money, and suffer large losses that they struggle to pay back or if at all. Some exchanges offer up to 100x margin trading, which can become very dangerous if not used correctly, and thus, is a lot of the driving motivation behind limiting margin trading leverage. However, it still reflect old world thinking since anyone in Japan can easily sign up for a VPN service (even pay for it in cryptocurrency) and go to another country where their desired trading is allowed.
Nevertheless, the whole concept of seeking out highly leveraged trading is counterintuitive to the initial goals of cryptocurrency to be sound money for everyday individuals. While a lot of trading can aide price discovery, too much speculative trading can simply cause massive booms and busts and effect individuals not even participating in the trading ecosystem.
Dash focused on long-term, sustainable growth
Dash has been focusing on gaining reliable, real world adoption by integrating into everyday merchants (~4,800 around the world), gift card providers, and cryptocurrency debit card providers. These services allow financially disenfranchised individuals to make easier and cheaper purchases, which helps them live better lives with more economic mobility. Some examples are individuals in Venezuela, Colombia, and Nigeria that have been able to use Dash while their local currency and/or banking system has been stealing their wealth through either inflation or excessive fees.
This type of growth is more sustainable than speculative trading since it focuses on building infrastructure and a community networks of individuals that trust the code and structure of Dash to use it as money. As these effects are further built out, it is harder to reverse, whereas margin trading can be cleared out in days or hours depending on the market. Thus, these laws that governments are putting on cryptocurrency for “consumer protection” become less necessary for coins like Dash that focus on providing added value for everyday consumers.