- Binance and FTX to reduce their maximum leverage limit to 20X.
- This is to encourage responsible trading and secure trading amidst regulatory scrutiny.
Many reports suggest that over 90 percent of CFDs traders lose money due to high leverages. This means only a few make profits, triggering the “responsible trading” campaign. To find a long-lasting solution to minimize the risk level of trading, FTX, and Binance exchange have announced the drastic reduction of the maximum leverage option on their platforms.
This initiative is to encourage responsible trading and secure trading for both new and existing users. It is also believed that the decision comes from the rising crackdowns on crypto exchanges based on their implementation of consumer protection measures.
A couple of months ago, Binance announced that its maximum leverage limit was 125X for its BTC/USDT contract. However, the exchange has backtracked its statement to change the limitation of leverages for new and existing users. On Sunday, Binance CEO Changpeng Zhao mentioned that effective from 19 July, the exchange began restricting the maximum leverage limit to 20X for new users.
In the interest of Consumer Protection, we will apply this to existing users progressively over the next few weeks.
Binance recently stated that it will discontinue the trade of stock tokens due to regulatory restrictions after regulators accused them of failing to comply with state regulations.
We will be winding down support for stock tokens on Binance.com to shift our commercial focus to other product offerings. Effective immediately, stock tokens are unavailable for purchase on Binance.com, and Binance.com will no longer support any stock tokens after 2021-10-14 19:55 (UTC).
Investors have therefore been asked to clear their stock token accounts before October 14.
FTX CEO Sam Bankman-Fried has also announced that the usual maximum leverage limit of 101X will be subjected to a drastic reduction to 20X. Bankman-Fried also disclosed that leverage trading accounts for little activity on the platform.
This will 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.
1) An effective margin system is integral to an efficient economic system.
There are limits to everything, though.
— SBF (@SBF_Alameda) July 25, 2021
He then admitted that the move was motivated by the need to improve and enable responsible trading. This has largely been encouraged by the crypto community. However, several FTX users also feel the 20X leverage limit is still high. Many believe that some new traders may be tempted to gamble for the 20X instead of trading based on rational strategies.