Crypto derivatives exchange FTX has decided to curb risky trading by limiting the leverage available to its users.
The exchange, founded by crypto billionaire Sam Bankman-Fried, has reduced the maximum leverage available on the platform down to 20x, a significant reduction from its previous limit of 101x.
In a Sunday tweet announcing the updated leverage limits, Bankman-Fried said that the decision was made in light of the exchange’s efforts to “encourage responsible trading.”
He asserted that leveraged trading is not a significant part of the exchange’s overall volumes, estimating the average open margin position on FTX is leveraged by roughly 2x, stating:
“This will hit a tiny fraction of activity on the platform, and while many users have expressed that they like having the option, very few use it.”
The reaction from the crypto community was largely positive, with many commenters highlighting the risks associated with high leverage.
Twitter user Crypto Tolkien asserted that many new traders have become “permabears on Bitcoin and crypto” after losing their shirt to high leverage in their first trades.
However, others said that 20x was still a lot of leverage, suggesting limits should be further reduced.
According to CoinGecko, FTX is the 13th-largest exchange by volume. As of this writing, FTX’s daily volume is nearly $1.5 billion, with volume surging 41% in the past 24 hours, as Bitcoin rallied by more than 10%.
On June 16, Cointelegraph reported that Huobi Global made some of its own restrictions, limiting margin trading for new and existing users. Citing concerns over increased regulation in China, Huobi dropped its allowable leverage from 125x to less than 5x.
The leverage reductions come as global regulators appear to be increasingly setting their sites on unregulated crypto platforms.
In late June, the United Kingdom’s Financial Conduct Authority ordered Binance to cease all regulated activities in the country following a review of its operations. A number of high-street banks followed up by restricting their customers from making transactions to and from the exchange.
Across the pond, financial regulators have been coming down hard on crypto lending firm BlockFi, with the Texas State Securities Board alleging the firm is offering unregistered securities.
Related: FTX’s Sam Bankman-Fried: Institutions are ‘desperate’ for crypto
On Tuesday, it was reported that FTX broke the record for the amount raised in a crypto funding round. The Series B investment round had over 60 participants, netting the exchange a whopping $900 million and increasing its valuation to $18 billion.