A self-regulatory organization formed by cryptocurrency exchanges in Japan is proposing a limit on how much investors can borrow when margin trading.

According to a report from Jiji Press on Tuesday, the Japan Virtual Currency Exchange Association (JVCEA) has suggested domestic trading platforms enforce a restriction that investors can only borrow up to four times their deposit.

The JVCEA said the proposed plan aims to protect domestic investors because there are currently no market rules governing the upper limit of how much cryptocurrency investors can borrow in margin trading.

According to statistics released by Japan's market watchdog the Financial Services Agency (FSA) in April, there were around 142,000 crypto traders focused on derivatives in 2017, comprising a small fraction of the total 3 million traders in Japan.

However, over 80 percent of the entire cryptocurrency trading volume in the country in 2017 came from derivatives trading, which recorded $543 billion last year. And more than 90 percent of that was from margin traders.

Formed by Japanese crypto exchanges in a response to a heist on the Coincheck platform early this year, the JVCEA seeks to impose self-regulatory rules in a bid to create a healthy cryptocurrency trading market. It is now planning to submit the proposal to the FSA to get the regulator's endorsement for a potential wider implementation.

That said, the association indicated the new rule could lead to crypto investors' departure from exchanges. As such, it aims to add measures gradually and would allow exchanges to independently set their own limits.

Japanese yen image via Shutterstock