Crypto Exchanges running foul of ESMA rulings on Leverage trading claims LMAX CEO

According to the latest report, claims are being made regarding several crypto exchanges that they are offering services of leverage trading that are exceeding the levels set by the European Securities and Markets Authority (ESMA).

Leverage trading is an immensely profitable yet highly risky strategy that enables traders to invest more than the collateral they have. A 2:1 leverage means that the traders can invest twice the actual value that they have. Likewise, 100:1 leverage means that traders can invest in 100x their holdings.

LMAX Exchange Group’s CEO David Mercer stated that how the crypto exchanges offer Contracts for Difference (CFD’s) needs to be reviewed. According to the European Securities and Markets Authority (ESMA), on any digital currency CFD accessible to novice traders, maximum leverage of 2:1 will be placed.

Furthermore, retail investors that are Europe based can access crypto exchanges that offer leverage trade services, including Huobi, Poloniex, Kraken, and BitMEX. According to the website of Kraken crypto exchange “trading with leverage is as easy as toggling a button”.

Lastly, many of these exchanges cross the legal limit, as, Poloniex exchange offer 2.5x leverage, Huobi offers a 5x leverage, and ever since 2016, BitMEX has been offering 100 x leverage on its Bitcoin/USD perpetual contracts. This does not only exceed the ESMA’s crypto CFD limit, but it also crosses the limit of 30:1 in fiat currencies; assets that are considered as less risky and more stable in terms of investment.