US Crypto Traders are Bypassing Foreign Exchange Ban to Trade Derivatives: Research
US regulators have banned foreign crypto exchanges to offer their service to US customers without getting regulatory clearance. However, the ban on foreign exchanges has done little to nothing in terms of US traders accessing these foreign crypto exchanges. A recent research report from Inca Digital has shown thousands of US crypto traders bypass the ban to trade crypto derivatives with high leverage on foreign exchanges such as Binance and FTX.
The main reason for US traders to access foreign unregulated exchanges is because regulated platforms in the country don’t allow for such high leverage trading. Leverage trading allows traders to bet on the future outcome of the market and with high leverage options come greater financial risks.
Financial regulators such as CFTC in the US continuously warn traders from accessing these unregulated platforms as they might not be able to seek legal help in case of fraud or other losses. CFTC said,
“U.S. customers will likely have little or no protection if they trade with unregistered firms that operate outside the U.S.”
The high-leverage trading offered by some of the crypto exchanges has been a key issue with regulators in the US and Europe.
FTX and Binance Reduce Leverage Limits
The growing regulatory scrutiny around the crypto market has forced several crypto exchanges to cut down their high leverage offering significantly. Binance and FTX, the two prominent crypto exchanges that are known for their high leverage offerings brought down the leverage limit to 20X from over 100X earlier. Both the exchanges said that the decision was made to make crypto trading less risky. However, many feel a 20X leverage is also quite high given the volatility of the crypto market.
CFTC was earlier investigating Binance.US for alleged derivative offerings despite not being authorized to do so. Binance also discontinued its futures and derivatives offering across Europe because of the growing regulatory pressure over high leverage offerings.
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