Binance Moving To 20x Leverage Limit, After FTX Announced the Same
World’s largest crypto exchange by trading volume, Binance, announced that it is reducing the maximum leverage users can use to trade futures contracts. The announcement comes a day after a fellow crypto exchange FTX announced doing the same change. Both companies are perhaps trying to avoid the worst regulatory storm with the move.
Binance founder and CEO Changpeng Zhao said in a tweet Monday, that the new limit is 20 times leverage ,down from 100 times.
.@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.
According to Zhao, the exchange imposed the limit on new users on July 19, and will gradually expand the move to all users.
FTX CEO Sam Bankman-Fried announced a similar change is taking place on his platform in a series of tweets posted on Sunday.
The Binance CEO didn’t reveal the reasons behind the decision, but said that upcoming changes for existing users were “in the interest of consumer protection,” which would point to a regulatory direction.
A New York Times article 23 July criticized high-leverage trading in crypto as a huge risk for the investors. The article implied impending regulatory moves against high leverage margin trading, citing Timothy Massad, a former U.S. Securities and Exchange Commission chairman.
Binance’s Zhao acknowledged that “volatility is amplified by the leverage,” according to the New York Times article.
Bankman-Fried said in his Twitter thread announcing FTX’s change that high leverage is a small part of positions, not a big contribution to volatility, and that many arguments against it “miss the mark.”
Exchanges are likely worried about the regulatory screws tightening on margin trading. Huobi suspended the service to Chinese users in June.
Binance has recently been under financial regulators magnifying glass.
