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Leaders in Cryptocurrency Industry Move to Curb the Highest-Risk Trades

Mr. Bankman-Fried said on Sunday that only a small percentage of traders take advantage of the maximum available leverage. He also argued that FTX had fewer liquidations than other exchanges and he had long tried to “encourage responsible trading.”

Still, he had predicted in an interview last week that some investors might not welcome any move to cut leverage. “We would get consumer outcry if we got rid of it, and we’d get very bad press,” he said. “But it might be the right thing to do.”

Mr. Bankman-Fried also acknowledged that high leverage created a perception that exchanges like his encouraged risky trading, even though he asserted this was not a fair conclusion.

That perception is in part why regulators around the world are eying Binance, the world’s largest cryptocurrency exchange. Just since June, the exchange has faced increased scrutiny from financial regulators in Britain, the Cayman Islands, Hong Kong, Lithuania, Italy, Poland and Thailand, many of them critical of its high-leverage derivatives offerings or a new product line introduced this spring that allows customers to buy cryptocurrency-linked versions of stocks like Tesla and Apple.

Mr. Zhao, the Chinese-Canadian founder of Binance and a developer tracing his professional roots to Wall Street, has said that the extreme leverage figures were just a “marketing gimmick” and that most traders do not use them.

Timothy Massad, the former chairman of the Commodity Futures Trading Commission, which regulates derivatives in the United States, said that he embraced FTX’s decision and that he hoped other platforms would follow. Binance and FTX are two of the world’s largest exchanges, but others including Phemex and BitMEX, were still offering, at least according to their websites, 100 times leverage as of Sunday.

The move by FTX, Mr. Massad said, might be motivated in part by FTX’s success this past week in raising $900 million in venture capital, the most ever for a cryptocurrency exchange. The high-leverage offerings on FTX are more of a reputational liability as Mr. Bankman-Fried looks to expand his platform’s global reach, Mr. Massad said.

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