Binance Lowers Futures Trading Leverage Limit & Withdrawal Limit

Binance Futures Trading Leverage Limit Lowered

The world largest crypto exchange, Binance has announced that they have started limiting their Future Trading Leverage margin to 20x. Previously, Binance allowed up to 125x margin for BTC/USDT contracts. This new development was announced just after the Hong Kong-based crypto exchange, FTX had enforced a similar policy, reducing the max leverage from 101x to 20x.

Binance CEO Changpeng Zhao, popularly known as CZ has confirmed this news by announcing the very same on Twitter on July 26. He said that Binance futures have already started “limiting new users to max 20x leverage” since July 19 and he further mentioned that “In the interest of Consumer Protection, we will apply this to existing users progressively over the next few weeks.”

(Note- Currently, a user will be categorised as new for leverage trading for the first 60 days from the day of registering as a futures trader on Binance.)

Binance Withdrawal Limit Slashed

Just a day after the first announcement, Binance officially announced that they have also reduced the withdrawal limit of their users, who have only completed their lowest-tier account verification. Previously, user’s with the Basic Account Verification could withdraw up to 2 BTC per day, but now, it has been reduced to 0.06 BTC per day (roughly ~ $2,000).

This was confirmed on Twitter by the company CEO Changpeng Zhao on July 27, a day after the first announcement was made about the lowering of Future Trade Leverage Limits. The company had also announced that the new norms were immediately effective for new users. While the existing users will be gradually rolled into this new norm by August. So that they get a chance to adjust accordingly and get the time to move their funds.

Reasons for the New Norms

It is currently, unclear why Binance has reduced the leverage margin from 125x to 20x. The company hasn’t made any official announcement about the reason. Though, it is believed that Binance was forced to take such a step along with FTX due to growing scrutiny against crypto exchanges by many regulators as high leveraging by new inexperienced investors or even by experienced investors may lead to massive losses.

The reason behind the lowering of the withdrawal limit is that the Basic Account Verification process only needs a user to input his name, date of birth and address without submitting any supporting documents. This falls way below any global Know Your Customer (KYC) standards as users could register under false information and the approval process is automatic with no one to scrutinise the information. This would give rise to many illegal activities.

The above two moves were mainly taken due to the recent growing scrutiny against Binance from global regulators especially after the Financial Conduct Authority (FCA) of the UK issued a warning that Binance is “not permitted to undertake any regulated activity in the UK.” Binance has also faced scrutiny from other regulatory bodies of several countries like the U.S., Canada, the Cayman Islands, Italy, Poland, Japan, Hong Kong, Thailand, and Singapore.

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