Crypto Exchanges Must Stop Acting Like Casinos in Wake of Robinhood Suicide: bitFlyer COO

The suicide of a 20-year-old Robinhood dealer needs to be a wake-up name for cryptocurrency exchanges that put income above buyer safety, mentioned a U.S. exec at one of many world’s largest such venues.

Many exchanges have been designed to encourage customers to commerce as ceaselessly as doable, typically with cash they don’t have, and resembled casinos greater than accountable buying and selling platforms, mentioned Joel Edgerton, chief working officer at bitFlyer U.S.

“There are too many exchanges which are run like casinos and exploit their clients,” he mentioned.

Edgerton spoke to CoinDesk simply over every week after a 20-year-old scholar, Alexander Kearns, killed himself after falsely believing he had obtained himself into greater than $700,000-worth of debt by buying and selling advanced choices contracts on Robinhood – an app-based buying and selling platform with a younger, retail-oriented following.

It later got here to mild that the unfavourable stability was a short lived part in between contract execution – i.e. Kearns wasn’t really within the crimson. However Robinhood has come below heavy criticism for permitting novice merchants to entry such advanced devices with out safeguards to keep away from confusion and, on this case, tragedy.

Late final week, Robinhood introduced a $250,000 donation to the American Basis for Suicide Prevention and vowed so as to add safeguards to its platform, corresponding to tightening eligibility necessities for advanced choices trades.

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Whereas Binance’s CEO Changpeng “CZ” Zhao mentioned in response final week that his change already applied a “Accountable Buying and selling” characteristic, Edgerton, a former head of operations on the insurance coverage arm of French financial institution BNP Paribas, mentioned the change was attempting to protect itself from additional criticism.

“I might say CZ’s response was mercenary. He’s utilizing a child’s demise to pitch his firm and Binance is definitely a part of the issue,” he defined. The platform will get customers hooked and their anti-addiction coverage “highlights the truth that they constructed the product to be addictive,” he mentioned.

Any crypto change that provided 125x leverage indiscriminately – which Binance started providing in October – isn’t critical about buyer safety, Edgerton continued. BitFlyer, which opened a U.S. workplace in 2017, says it already restricts entry to leverage and may flag and even ban customers that show troubling buying and selling patterns. The Tokyo-based change ranks ninth globally, in keeping with CoinGecko, and is the market chief in Japan.

It was reported final summer time a Chinese language bitcoin dealer killed himself after a 100x place on derivatives change BitMEX was liquidated, a lack of about $16.four million in a single commerce. Across the identical time, an nameless scholar dealer mentioned he was having suicidal ideas after shedding 1000’s of {dollars} on a number of leveraged trades on the identical platform.

Arthur Hayes, BitMEX’s CEO, has beforehand defended his enterprise, arguing that in a free market, clients can all the time transfer onto different platforms in the event that they fear about being exploited or defrauded.

When contacted by CoinDesk, Binance declined to remark. BitMEX hadn’t responded to the same request by press time.

See additionally: BitMEX Sees Largest Brief Squeeze in eight Months After Bitcoin Surge

Cryptocurrency exchanges have extra of a task to play in buyer safety, Edgerton mentioned. Regulators worldwide cap leverage for retail traders, each in crypto and in conventional property, corresponding to equities. Japan’s Monetary Providers Company (FSA) halved most leverage down to 2 instances the worth of the deposit this 12 months.

As such, there’s no purpose an change ought to supply 100x leverage on high of extremely unstable property with out first checking whether or not the investor is aware of what they’re doing and that they’ve the earnings to cowl that degree of publicity, argued Edgerton.

“We’ve got a duty to supply merchandise which are appropriate to our shoppers,” he added. The Robinhood suicide “is what occurs when corporations give attention to tech and earnings relatively than doing the suitable factor for his or her clients.”