The CEOs of both FTX and Binance exchanges have announced they are to limit the leveraging trading limits of new users.
FTX chief Sam Bankman-Fried made the announcement yesterday, and Binance’s Changpeng Zhao said he had made the decision last Monday, but delayed announcing it until today.
.@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
Following the removal, both exchanges now support maximum leverage trading of 20x. CZ said the move was done to protect consumers and traders on the platform, adding “in the interest of consumer protection, we will apply this to existing users progressively over the next few weeks”.
SBF added the removal of high leverage trading was “a step in the direction the industry is headed, and has been headed for a while”. He also mentioned that leverage trading above 20x contributed to “a tiny fraction of our volume” and “very few use it”.
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
When speaking recently with the New York Times regarding their involvement with crypto, SBF spoke briefly on removing leverage.
“It’s a bit of a double-edged sword,” he said.
“So there are some exceptions to this, but with most of the exchanges, a general consensus is maybe we should just get rid of 100 and 50 and anything above 10X.
“This could also indicate that FTX has potentially toyed with the idea of removing leveraged trading for some time.”
FTX recently completed a funding round that secured a further $900m in funds alongside a valuation of $18bn. Bankman-Fried expanded on future FTX plans, which include using the funds to break through into regulated markets by acquisitions of financial companies that have a legit network in other countries.
1) I'm deeply humbled by the support we've gotten from our new partners:https://t.co/Yz34mEEGcR
— SBF (@SBF_Alameda) July 20, 2021
The news coincides with FTX recently buying out Binance’s initial investment of shares that were made during their early phases. The move could indicate that FTX is distancing itself from Binance’s recent regulatory issues.
Binance’s decision to remove leveraged trading comes as heavy regulatory oversight limits their offerings in certain countries. Their delisting of stock tokens and financial regulators in both the UK and Hong Kong enforcing the suspension of “regulated activity” has forced Binance to increase the size of both its compliance and regulatory team to appease regulators.
Now, following the issues faced in key international territories, Binance looks to be expanding on its Singapore-based operations. According to its LinkedIn Jobs page, out of 981 potential positions, 262 are currently available in Singapore, with all the positions looking to have been posted in the past two weeks.
Leading banking institutions and payment processors in the UK have also started to limit transfers to and from Binance, citing “excessively high fraud rates” as a key reason for the decision. Additionally, Binance has announced today that it will delist AUD, EUR, and GBP margin trading pairs by August 12.
Binance and FTX remain leading providers for both spot and leveraged trading, with 24-hour trading volume metrics recorded today of $26.9bn and $1.9bn respectively according to Coinmarketcap.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.