Binance, a global cryptocurrency exchange, is facing an ongoing regulatory crackdown; therefore, users should expect more restricted support to some of its trading services. Binance stated that in the event of extreme price movement, all of the users’ margin balance may be liquidated.
On Monday, Binance officially announced that the margin trading pairs of three fit currencies would get delisted; these include the British pound sterling, the Euro, and the Australian dollar. From this announcement, the exchange will suspend these fiat trading pairs of Aug. 10. After this suspension users can prepare for cancellation of any pending orders and automatic settlement. By Aug. 12, these three margin trading pairs will no longer be listed on the exchange.
— Binance (@binance) July 26, 2021
Curbing Trading Risks
These trading restrictions are to be expected since the exchange is aggressively focusing on curbing trading risks. Recently, on Binance Futures, maximum leverage positions reduced from 125x to 20x, a move meant to significantly limit leverage trading. Their announcement insisted that, “Margin trading carries a substantial risk and the possibility of both significant profits and losses. Past gains are not indicative of future returns. All of your margin balance may be liquidated in the event of extreme price movement.”
In July 2019, the exchange launched Binance’s margin trading service. In the crypto ecosystem, margin trading involves trading cryptocurrencies by borrowing funds and letting traders access bigger capital to leverage their positions. Binance lets users open a position with their capital coupled with the quantity of assets they wish to purchase by lending them funds. This requires users to open a position based on maximum applicable leverage. In addition, Binance deducts the repay amount automatically and includes other charges when users close a position.
Binance Faces Increased Scrutiny
Binance has faced heightened probing incidents from financial institutions and global regulators. Authorities in the United Kingdom, the United States, Italy, and other nations have served the exchange multiple warnings. Financial Institutions such as NatWest Bank and Barclays from the United Kingdom started blocking payments to Binance since late June.
The Financial Times released a report on Sunday stating that some crypto funds are steering clear from trading on the exchange after the increased scrutiny facing Binance. ARK36, a hedge fund firm, and its fellow crypto-focused investment fund, Tyr Capital cutting exposure to Binance. ARK36’s executive director, Ulrik Lykke claimed that there is a lot of uncertainty and global regulatory pushback surrounding Binance, thereby raising red flags for those keeping serious capital at the exchange.
Image courtesy of Binance