In an unprecedented move, Binance decided to lower the maximum leverage of derivatives contracts from 100x to 20x.
Key Takeaways
- Binance announced delisting of fiat pairs in EUR, GPB, and AUD in margin accounts from August.
- Binance CEO stated that they have started to reduce the upper leverage limit of derivatives account from 100x to 20x.
- The exchange has been focused on complying with regulations worldwide.
Binance announced the delisting of euro, pounds, and Australian dollar trading pairs in margin accounts. The world’s largest exchange has also decided to reduce the maximum leverage in trading to a maximum of 20 times the margin amount from 100x.
Binance Limits Trading Leverage
Binance has lowered the dose of euphoria in markets.
This morning Binance announced the delisting of three fiat pairs in EUR, GPB, and AUD from margin accounts, starting Aug. 8 at 2 am UTC. Binance’s Margin feature enables users to take loans for purchasing crypto assets up to ten times their original capital.
Binance has also reduced the trading leverage from 100x to 20x for new users since July 19, 2021. Changpeng Zhao, the CEO of Binance, notified in a Twitter post this morning that the plan to implement a lower margin limit had begun last week. Zhao said, “We didn’t want to make this a thingy.”
He added that they intend to progressively lower the limit for all existing users over the next few weeks.
The exchange has faced multiple regulatory threats in the last couple of weeks, particularly in the U.K. The country’s Finance Conduct Authority made the exchange suspend EUR and GPB withdrawals. The regulatory effects have been felt elsewhere in Europe with the SEPA transfers block and today’s margin account delisting.
The lenient leverage across crypto derivatives markets has been one of the most criticized aspects of the industry. Famous economists like American professor Nouriel Roubini have often derided the volatility and risk induced due to high leverage, saying that it enables retail users to fall into a liquidation trap, wiping out their capital values. For instance, this morning, over $800 million in shorts got liquidated in the last 24 hours as Bitcoin pumped to a high of $40,000.
The new limit for new and existing users will be five times lower than the previously 100x margin.
Zhao had noted in a mission statement earlier this month that the exchange will cooperate with authorities worldwide to comply with regulations. Until now, they have operated in the grey area of national laws. They have decided to take a targeted approach in addressing the laws of each country specifically. The exchange set up an independent unit in the U.S. in 2019 and is now planning to publicly list the exchange following Coinbase Global's (NASDAQ:COIN) stock listing.