NewsletterCoinbase Restricts Trading Leverage to Enhance Stability
Coinbase International Exchange, a global extension of the renowned U.S.-based Coinbase crypto exchange, has announced a significant change in its trading leverage policy. Effective Dec. 28, the overseas arm will impose a 10x leverage cap for its perpetual futures products. This move aligns with the exchange’s commitment to risk management and regulatory compliance, reflecting a cautious approach in the volatile cryptocurrency market.
Coinbase Adjusts Margin Requirements for Digital Assets
The new leverage cap specifically affects popular perpetual futures contracts such as Bitcoin, Cardano (ADA), Ethereum, Litecoin, Solana, and XRP. Traders utilizing the maximum 10x leverage will be restricted, limiting them to a notional value of $90,000 across all perpetual contracts. This policy is designed to mitigate excessive risk-taking and enhance market stability.
Coinbase International has clarified that while trading can continue beyond the 10x leverage, such transactions will be subject to the default initial margin (DIM) requirements. These requirements vary depending on the digital asset, ranging from 20% (equivalent to 5x leverage) to 40% (equivalent to 2.5x leverage). This structured approach to leverage is part of the exchange’s strategy to balance accessibility with prudent risk management.
Strategic Decisions Amid Regulatory Evolution
The decision to cap leverage is influenced by various factors, including the depth of the exchange’s order book, trading volumes, and the results of stress tests against the balances of the insurance fund. This dynamic approach demonstrates Coinbase International’s commitment to adapting its policies to changing market conditions and regulatory landscapes.
Coinbase International’s launch of perpetual futures trading in September followed the acquisition of a class F license from the Bermuda Monetary Authority (BMA). The choice of Bermuda for its international operations was strategic, with the jurisdiction being recognized for its transparent and cooperative regulatory environment. However, the service is limited to non-U.S. consumers in selected countries, emphasizing the company’s adherence to regional regulatory norms.
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