It seems that the crypto industry is increasingly turning to self-regulation as the rope of regulators around them threatens to tighten – and the trend hasn’t missed a major decentralized exchange either.Source: Instagram, Binance
Sam Bankman-Fried, CEO of major crypto derivatives exchange FTX, announced that the exchange has decided to limit the number of margin trading debt traders from 100 times to 20 times leverage.
“An effective margin system is an integral part of an efficient economic system,” he said, and concluded: “However, there are all limits.”
Bankman-Fried went on to say that margin systems must be liquidated as a backup, but with the aim of “rarely” doing so. At FTX, he says “far less than one percent of the volume is from margin calls,” which is in contrast to some platforms which “are sometimes> 5% and have some data removed because it looked bad”.
Liquidations in the last 24 hours:
Source: bybt.com, 09:49 UTC
Leveraged trading refers to raising funds so that you can take a larger position than you could do with your existing funds so that you can potentially make a higher profit. While margin trading allows traders to increase their returns, it can also lead to increased losses and liquidations, which is why seasoned traders advise novice traders to stay away from leveraged trading.
The average leverage used on FTX is roughly 2 times that. “And while we think many of the arguments for high leverage fall short, we also don’t think it’s an important part of the crypto ecosystem, and in some cases it’s not a healthy part of it.”
Hence, according to the CEO, eliminating high leverage (more than 20 times) is a step in the direction the industry has been moving in for a while.
“Again, this will affect a tiny fraction of the activity on the platform and while many users have said they like the option, very few use it. And we think it’s time to get away from it, ”he added.
The risky trades offered on FTX, Binance, BitMEX, and other exchanges are often blamed for hastening a market downturn in May.
Clara Medalie, research director at Kaiko, a provider of cryptocurrency market data in Paris, told the New York Times that “these liquidations are obviously a big factor in the price crash” and that “it’s a vicious circle.”
The price crash caused the exchanges to automatically liquidate the trading positions of the most heavily leveraged investors – before their collateral was no longer sufficient to cover their positions.
FTX’s high leverage offerings are more of a reputational damage as Bankman-Fried seeks to expand FTX’s global reach, said Timothy Massad, former chairman of the Commodity Futures Trading Commission.
And another exchange appears to be reacting to recent regulatory developments. Major crypto exchange Binance said their futures have already started restricting new users to the maximum 20x leverage.
The move was on July 19, according to CEO Changpeng Zhao, but the team “didn’t want to make this a thing”.
“In the interests of consumer protection, we will gradually apply this to existing users over the next few weeks,” said Zhao.
After previously being offered a maximum of 125 times, an investment of USD 1,000 could be converted into a bet of up to USD 125,000 on Binance.
All of this and likely more to come as regulatory pressures from around the world, and more recently from the US in particular, on the rapidly developing crypto industry increase. Binance alone, for example, has faced regulatory problems in a number of countries.
“It is clear that strict regulations can be expected. Binance intends to move from a technology startup to a financial services company. We are stepping up compliance efforts, including former regulators, ”said Zhao during the REDEFINE TOMORROW 2021 virtual summit.
Binance Margin announced today that it will delist AUD, EUR and GBP cross and isolated margin pairs in August.
A DEX (self) also hits
These two centralized exchanges aren’t the only ones apparently doing preventative regulation.
The software development studio behind the large decentralized exchange Uniswap (UNI), Uniswap Labs, has restricted access to a number of tokens on an open source interface it supports, app.uniswap.org – “in line with the actions of other DeFi -Interfaces, “you said.
The list includes derivatives and tokenized stocks. The listed coins “always represented a very small part of the total volume” on Uniswap, argued the team.
“In order to continue to innovate and make this tool available to the Uniswap community, we are monitoring the evolving regulatory landscape,” they said.
In particular, Uniswap restricts access only through its own interface, adding that “this action has no effect on the Uniswap interface code, which remains open source, or on the many other portals or locally running entities that are responsible for accessing the Uniswap protocol can be used. “
Last Tuesday, US Securities and Exchange Commission (SEC) chairman Gary Gensler suggested that stock tokens must be registered, be it on centralized or decentralized platforms. “If these products are collateral-based swaps, the other rules I mentioned earlier, such as trade reporting rules, apply to them,” he added, noting that the SEC is already pending several retail offerings have made. Swaps and “unfortunately there can be more.”
Last week, Binance also announced that stock tokens are already unavailable for purchase on Binance.com, and that platform will no longer support such tokens as the platform shifts its “commercial focus to other product offerings”.
Playing the regulation game
Meanwhile, some crypto exchanges such as Coinbase, Kraken and Gemini are already concentrating more on compliance, trying to avoid gray regulatory zones and making them their competitive advantage.
“We’re playing the long game,” Gemini’s Cameron Winklevoss told Bloomberg recently. “We’re trying to be the fastest turtle in the race. The long game pays off over time.”
Gemini’s parent company, Gemini Trust Co., also helped found the Virtual Commodity Association, whose goal is to prevent fraud and manipulation and which is “reminiscent of Wall Street self-regulatory groups.”
Meanwhile, Coinbase released audited financials and “stepped up” its compliance operations when it listed stocks earlier this year, while Kraken received a regulated banking charter in Wyoming while it also prepares for its IPO.
“The catch-22 is that the cryptosystem was set up to bypass large banks,” said John Griffin, a professor of finance at the University of Texas at the McCombs School of Business in Austin. Griffin added that “instead of having this autonomous universe free from government regulation, we have crypto exchanges that play the role that traditional exchanges and governments play in traditional markets.”
– Bitcoin shows resilience amid global political setbacks
– EU regulation can harm small crypto players, stablecoin users and Elon Musk
– SEC ensures clarity in token distribution, crypto-based ETPs – Hester Peirce
– Korean regulator to force Crypto Overseas Exchanges to abide by their rules
– BlockFi fights regulatory fire in 3 US states; Allegedly wants to go public
– European Commission clarifies what “anonymous crypto wallets” mean
– SEC Coinschedule Settlement opens old crypto-securities wounds
– Japanese regulator report suggests DeFi regulations could come
– UK Watchdog will target “misleading” crypto investment marketing (again)
– For this reason, Robinhood does not allow withdrawals from Bitcoin, DOGE & Co.
Comments are closed.