RoboForex is launching an extremely high-leverage product via the company’s Belize-regulated subsidiary. As the industry is tackling the reduction of leverage across the European Union, the firm is boosting leverage on crypto trading to 50:1. For an asset class as volatile as cryptocurrency, this yields a massive risk to clients and to the brokerage.
According to Roboforex, the new cryptocurrency leverage will be available across all accounts and trading platforms and includes Bitcoin, Bitcoin Cash, Dash, EOS, Ethereum, Litecoin and Ripple. The company’s offering comes amid increasingly tight scrutiny on leverage on the part of reputable regulators. Earlier this year, the company launched Bitcoin as a base currency.
The lax regulatory framework in Belize permits the firm to deliver this product to market, however what the long-term effect of such a move will be is unknown. Regulators globally have been cooperating closely in recent years and offshore jurisdictions have historically proven to be risky for institutional and retail clients alike.
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Commenting on the company’s move, the Chief Marketing Officer of Roboforex, Denis Golomedov, said: “Many of our clients trade cryptocurrencies. It’s really important for them to cooperate with the broker, which provides the most comfortable trading conditions and highest security level when they trade these instruments. The increased leverage will allow our clients to implement a wider range of trading strategies and significantly increase their trading volume.”
With crypto moves in excess of 5 percent in an hour being common place, the risk to the clients and to the brokerage are significant. Excess leverage on volatile financial instruments has historically caused significant losses to the industry with black swan events such as the SNB-induced Swiss franc panic, Brexit and the Bitcoin Cash fork wreaking havoc across the market.
Reputable regulators worldwide have for years been telling brokers that they should be adopting a more conservative approach to leverage. Japan and the US pioneered restrictive leverage caps years ago, and the European Union followed suit on the 1st of August of this year. The company’s move is a clear step away from this trend.