If there is anything that is already established in the crypto world, it is the fact that there are wild price swings. Just a few weeks ago, Bitcoin was at $8,500 with investors optimistic about the possible scenario of a Bitcoin ETF. However, it slipped all the way to around $6,100 yesterday after the Bitcoin ETF application by Cameron and Tyler Winklevoss was denied along with the announcement of the US Securities and Exchange Commission that it is going to postpone its decision regarding Bitcoin ETFs.
A published report by the Union Bank of Switzerland last week concluded that 70% of price movements within the crypto market are speculative in nature. It can be blamed due to the fact that the market relies on the health of Bitcoin. It is evidenced by the lack of standalone impact by the altcoins.
Speculators Dominate the Market
According to the DEA, the ratio of criminal activities that made use of blockchain has significantly decreased. In the past, 90% of Bitcoin moving between wallets have been associated with criminal activities. Today, things have changed. The number of transactions associated with criminal activities decreased to just 10%.
Japan’s Goal to Regulate the Speculative Asset
Japan is looking to regulate the speculative asset. In fact, the trading volume in Japan last year was at ¥69 trillion with 3.5 million users. It has been discovered that Japanese crypto users usually trade for profit. According to a senior official of a major crypto exchange, “young users who had previously no connection (with cryptocurrencies) have increased at a breathless pace”.
Margin trading is to blame for the popularity of cryptocurrencies in the country. This offers leverage by online trading companies. This means that even those with a small capital could invest in virtual currencies. However, it is quite different from the forex market that is limited to 25:1. It is all because it functions outside the Financial Instruments and Exchange Act. Unfortunately, margin trading can sustain massive losses for its investors.
Focus on Electronic Settlements
The FSA has focused on electronic settlements. And because of this, they came up with the Payment Services Act in 2010. However, there was a revision of the said act last year in preparation for the increase in the number of payments that are being made by digital currencies. According to a senior FSA official, this scenario can “prevent a situation in which there is no law governing (cryptocurrencies) when they come into wide use”.
However, since it is focused on payments, the FSA hasn’t anticipated the use of cryptos for speculative purpose. According to an expert, “virtual currencies should be positioned as assets for investment, while a legal system to protect investors needs to be established as a matter of urgency”.
Japan has been leading the way towards crypto regulations. In fact, after the hacking incidents in Japan, its regulators have come up with stricter rules that aim to protect investors and to prevent such incidents from happening again. And because of this, there were even some crypto exchanges such as Kraken that chose to head elsewhere.