Popular cryptocurrency exchange Binance is lowering its futures trading leverage limit to 20x in a push for consumer protection, Changpeng “CZ” Zhao, Binance’s CEO, said on Twitter on 26 July.
According to Zhao’s announcement, Binance has already lowered the leverage limit for new users to 20x last week, and will now start applying the change to existing users over the next “few weeks”. While the CEO did not specify the reason behind the change, he stated that it was “in the interest of Consumer Protection”.
Binance launched its futures trading platform back in 2019, and initially allowed users to open leverage positions at a maximum of 20x, but later increased that limit to 125x for its BTC/USDT contracts, claiming it did so using a “sophisticated” risk engine and liquidation model.
The move follows in the steps of the FTX exchange, which yesterday also lowered its maximum leverage limit to 20x from 101x. At the time the FTX’s CEO, Sam Bankman-Fried, said the reduced limits will only “hit a tiny fraction of activity on the platform, and while many users have expressed that they like having the option, very few use it.”
While Binance is saying the move was in the interest of consumer protection, the New York Times posted an article on Friday implying that regulators will move against high leverage margin trading soon, citing a former SEC chairman. It is understandable that Binance is trying to avoid any more attention from regulators, considering the U.K. FCA issued Binance a warning in June, while the Italian CONSOB stated the exchange was not authorized to offer crypto investment services in the country in July.