Binance Cuts Down Leverage Limit to 20x
- Binance announced it is lowering its futures trading leverage limit from 125x to 20x only a day after another major exchange, FTX, did the same.
- The New York Times implied regulators will be shifting their gaze on to high leverage margin trading soon, citing a former U.S. SEC chairman on Friday.
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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.
- The popular crypto exchange has decided to sell its business in Russia to CommEX, a crypto exchange business that was officially launched on Tuesday.
- Binance noted that it will fully exit the Russian market, and have no ongoing revenue split or any option to buy back shares in the business.
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- The company said it will be suspending its crypto-backed debit card service in the Middle East on 25 August, and in Latin America by 21 September.
- Although no reason was given for the decision, the company noted that “less than 1% of users” in those regions will be affected by the change.
- A spokesperson said the change was due to the “changing market and user needs”, and that Binance will now be refocusing its resources on its main products and long-term goals.
- Launched in March 2022, Binance Connect helped crypto businesses connect with the traditional finance system, and supported 50 cryptocurrencies and networks such as Visa and Mastercard.