FTX Cuts Leverage Limit to 20x From 100x as Criticism of Margin Trading in Crypto Grows

"It's time, we think, to move on from it," CEO Sam Bankman-Fried said in a tweet.

AccessTimeIconJul 25, 2021 at 7:36 p.m. UTC
Updated Sep 14, 2021 at 1:30 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

In a move perhaps designed to help dodge the worst of a coming regulatory storm, the head of a large cryptocurrency derivatives exchange said Sunday he's limiting the amount of margin-trading debt traders can wager from 100 times leverage to 20 times.

  • In a Twitter thread shown in an abridged fashion below, FTX CEO Sam Bankman-Fried said that while he disputes claims that high leverage is a major cause of volatility in the market and high leverage makes up only a small part of FTX's business, "It's time, we think, to move on from it."
  • In recent months it's been clear that stricter regulation of the largely unsupervised cryptocurrency market is on the horizon and the amount of leverage that traders can wield gets mentioned a lot by crypto critics and regulators alike.
  • In particular, the U.S. Securities and Exchange Commission is expected to soon release a new regulatory framework for the sector, following a letter from Sen. Elizabeth Warren (D-Mass.) to SEC Chairman Gary Gensler demanding that one be released by July 28.
  • By self-policing itself now, FTX is perhaps hoping to avoid being a target of regulators by showing it's a good and responsible actor in the space, and by throwing shade at some of its competitors:
  • "At FTX, way less than a percent of volume comes from margin calls," Bankman-Fried said. "This contrasts with a few platforms which are sometimes [more than] 5%, and some which removed data because it looked bad."
  • Bankman-Fried recently said he sees the U.S. as his next big target market, so FTX has a strong incentive to placate Washington, particularly in light of a New York Times article highlighting the use of leverage at FTX and other exchanges.
  • One of those exchanges, Binance, has lately very much been in the crosshairs of regulators from Britain to Japan.

UPDATE (July 25, 20:00 UTC): Adds background about FTX and Binance in the last few paragraphs.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.