Major crypto trading platforms, Binance and FTX exchange, have begun cutting the maximum number of leverage users can select when trading futures contracts. FTX exchange took the first step, then followed the world’s largest exchange Binance, which has been under regulatory hurdles recently.
Although the exchanges said the reduction of the max leverage is aimed at consumer protection, some people claim the change was made for regulatory reasons.
Binance and FTX Reduce Futures Leverage to 20x
Sam Bankman-Fried, the founder of FTX exchange, announced the exchange would be reducing the 100x leverage option on Sunday. He tweeted that the average leverage used on the platform was only 2x. Such high leverage is unhealthy and it’s not an essential part of the cryptocurrency ecosystem, according to Sam.
For this reason, the exchange decided to lower the maximum leverage to 20x.
9) And so, after lots of back and forth, we're going to be the ones to take the first step here: a step in the direction the industry is headed, and has been headed for a while.
Today, we're removing high leverage from FTX. The greatest allowable will be 20x.
— SBF (@SBF_Alameda) July 25, 2021
Thereafter, the CEO of Binance, Changpeng Zhao, took to Twitter to disclose that they will also reduce maximum leverage to 20x for existing users in the coming weeks. CZ said the exchange has already implemented this change for new users since July 17, which was basically aimed at consumer protection.
.@binance futures started limiting new users to max 20x leverage last Monday, Jul 19th, 7 days ago. (We didn't want to make this a thingy).
In the interest of Consumer Protection, we will apply this to existing users progressively over the next few weeks.
Stay #SAFU. 🙏
— CZ 🔶 Binance (@cz_binance) July 26, 2021
Besides the leverage reduction, Binance is also planning to discontinue cross and isolated margin pairs for fiat currencies like the Australian dollar (AUD), Euro (EUR), and the British Pound (GBP). On August 12, all related pairs will be automatically settled, pending orders will be canceled, and then delisted from the Binance Margin market.
Binance also discontinued tokenized stocks trading, amid regulatory concerns, especially from Hong Kong regulators.
Judging by the recent announcement from the crypto exchanges, it seems there is an incoming wave of regulatory scrutiny. Some people claim the reduction of Futures trading leverage was triggered for regulatory reasons, as the exchanges undergo overhaul within the same month.
The decentralized space isn’t left out. Recently, the leading decentralized exchange on Ethereum, Uniswap, restricted access to certain tokens, including tokenized stocks and Tether Gold, from their frontend trading platform, app.uniswap.org.