Binance has announced the delisting of euro, pound and Australian dollar trading pairs into margin accounts. The largest exchange in the world has also decided to reduce the maximum trading leverage to a maximum of 20x the 100x margin amount.
Binance Limits Trading Leverage
Binance has lowered the dose of euphoria in the markets. This morning Binance announced the delisting of three EUR, GPB and AUD fiat pairs from margin accounts, starting August 8 at 2 am UTC. Binance's Margin feature allows users to take out loans to purchase cryptocurrencies up to ten times their original capital.
Binance has also reduced trading leverage from 100x to 20x for new users as of July 19, 2021. Changpeng Zhao, 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 it a thing."
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 past couple of weeks, particularly in the UK. The country's financial conduct authority has suspended the exchange for EUR and GBP withdrawals. The regulatory effects were felt elsewhere in Europe with the blocking of SEPA credit transfers and today's delisting of the margin account.
Is leverage a real problem?
Undue leverage in crypto derivatives markets has been one of the most criticized aspects of the industry. Famous economists such as American professor Nouriel Roubini have often mocked the volatility and risk induced by high leverage, claiming that it allows retail users to fall into a liquidation trap, wiping out their capital values. For example, this morning, over $ 800 million in shorts were liquidated in the past 24 hours as Bitcoin hit a high of $ 40.000.
The new limit for new and existing users will be five times lower than the previous 100 times margin.
Zhao noted in a mission statement earlier this month that the exchange will work with authorities around the world to comply with regulations. So far they have operated in the gray area of national legislation. They decided to take a focused approach in addressing each country's laws in a specific way. The exchange established an independent unit in the United States in 2019 and is now planning to publicly list the exchange after Coinbase Inc.
