A group of cryptocurrency exchanges in Japan has officially submitted a proposal to the countries Financial Services Agency (FSA) in a bid to form their own regulatory organization. The group which was formed in March is calling itself the Japan Virtual Currency Exchange Association (JVCEA).
The Association which registered with the FSA in April this year comprises of 16 crypto exchanges. It has applied with the regulator to become what is known as a certified fund settlement business association. If granted approval, the JVCEA would hence, impose its own regulatory conditions on the digital currency trading market. Such a move would be fundamental in developing a crypto sector that is more stringent.
JVCEA has since prepared a draft document consisting of almost 100 pages. The draft document contains the proposed set of rules to regulate the exchanges. Among the draft rules, is the requirement that operating crypto exchanges should carry out audits from time to time. Also, the rules prohibit anonymous digital currencies such as dash or monero from being traded in the exchanges.
The various exchanges began thinking of forming the association immediately after the hacking of the Coincheck exchange. The said exchange lost numerous NEM coins worth a total of $533 million in January following a security breach.
In a bid to prevent such unscrupulous activities that end up tarnishing the name of crypto exchanges from happening again, the group resulted in coming up with its own rules. Following the ordeal, the FSA also went ahead to tighten its regulations.
Imposing a leverage limit
Meanwhile, JVCEA proposes to put a cap across all the exchanges, on the degree to which traders should utilize funds they have borrowed to amplify profits and losses. According to a Nikkei report, the association stated that “The self-regulatory body for Japan?s cryptocurrency exchanges is firming up plans to set a 4-to-1 leverage limit on margin trading.? JVCEA revealed that it was doing this to try and mitigate the risk of incurring huge losses as a result of the volatility of the tokens.
The new rules are to come into force at the lapse of a one-year grace period. However, the exchanges that will satisfy certain conditions might be exempted from the above measures. Such exchanges must put automatic stop-loss structures.