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Binance Says It's Cutting Leverage Limit to 20x, a Day After FTX Announces the Same

"We didn't want to make this a thingy," Binance CEO Changpeng Zhao posted Monday on Twitter, a week after making the change.

Jul 26, 2021 at 6:01 a.m. UTC
Updated Sep 14, 2021 at 1:30 p.m. UTC

Binance, the world's largest crypto exchange by trading volume, said it is reducing the maximum leverage users can use to trade futures contracts, a day after derivatives exchange FTX announced the same change, moves perhaps designed to help avoid the worst of a coming regulatory storm.

  • The new limit is 20 times leverage, the exchange's founder and CEO Changpeng Zhao said in a tweet Monday, down from 100 times.
  • Binance imposed the limit on new users on July 19, and will gradually expand the move to all users, Zhao said.
  • FTX CEO Sam Bankman-Fried announced a similar change is taking place on his platform in a tweet posted on Sunday.
  • Zhao didn't state the reasoning behind the decision, but said that upcoming changes for existing users were "in the interest of consumer protection."
  • A July 23 New York Times article criticized high-leverage trading in crypto as risky. 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.

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