The Australian subsidiary of the leading crypto exchange, Binance, today shut down the positions of some of its derivative clients. The clients affected were incorrectly classified as “wholesale retailers,” leading to their derivative market orders being closed as they were short of the requirements.
The closure was in line with Australian regulation, which does not allow retail traders to trade in the derivative market. Binance also confirmed it has contacted customers affected by the unprecedented cutoff and will reimburse their losses.
“Our team identified a small number of Australian users who were incorrectly classified as ‘Wholesale Investors’ on Binance. As per Australian regulation, we were required to inform these users and close any of their derivative positions with immediate effect. We have already contacted all impacted users and will fully compensate them for their losses incurred while trading derivatives on Binance,” the company said.
Affected Users Will Require Verification
According to the affected users, Binance required that they submit proof that they were wholesale traders before they could trade derivatives again.
Binance Australian Derivatives began investigating who they onboarded to the trading platform in January. The analysis aligned with Binance’s agreement with Australian regulators not to allow retail traders to trade derivatives. Binance confirmed in an email sent to affected customers that they did not meet the wholesale trader requirement, leading to their immediate position closure.
Binance classifies derivatives as complex and high-risk products. Due to the nature of the product, only wholesale traders in Australia can access it.
Selling Pressure Preceded News
After the tweet by Binance about some perpetual positions shut down, the broader market experienced FUD. Bitcoin dropped by 2.1% against the Australian dollar. The BTC/USD pair also saw a slight dump after the news.
It was also reported that traders opened over $11 billion worth of short positions after the tweet. The market, however, recovered immediately, but Bitcoin is still trading below $24,000 at the time of writing.
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