Major Japanese exchange Coincheck to drop leveraged trading

As Japan’s Virtual Currency Exchange Association continues its efforts to have member organizations implement best practice financial management, Coincheck has announced it will end leveraged trading from March 13th, 2020.

Coincheck’s move to end leveraged trading altogether follows its September decision to drop its leverage trading cap from 5x to 4x (in accordance with self-regulation and guidelines designated by the Japan Virtual Currency Exchange Association). Although the company made no announcement as to exactly why it was suspending its leverage service, the move aligns with amendments to Japan’s Financial Instruments and Exchange Act which are slated to become law in April 2020.

The amendments specifically target leveraged crypto trading with tougher licensing and securities rules – and dramatically increase the amount of compliance overhead exchanges would have to absorb should they continue to offer leverage products.

Coincheck is asking users who currently have positions in the service to settle all positions before the end of service and transfer Japanese yen balances from Coincheck’s leverage accounts to their trading accounts. The deadline for trading is March 13, 2020, at 12:00 p.m. (JST), and the deadline to transfer balances to trading accounts is at the end of March 2020.

In January 2018, Coincheck was subject to one of the largest crypto hacks ever when around $534 million of XEM (the NEM token) was stolen from the exchange. What made the theft all the more concerning was the revelation by Coincheck’s management that the half-a-billion dollars worth of stolen XEM was in a hot wallet at the time it was taken – a wallet which was not protected by multi-signature authentication. This, at a time when all exchange operators should have been on high alert given earlier major hacks at Poloniex and Bitstamp.

Following this incident, Japan’s Financial Services Agency (FSA) issued orders for the exchange to improve its business operations. In April 2018, Coincheck was made into a wholly-owned subsidiary of the major listed Japanese internet securities firm Monex Group, and the company resumed services as a registered cryptocurrency exchange operator with the FSA.