Via their official Twitter handle, crypto exchange Binance confirmed that it closed the position of some Australian traders. According to the post, the company incorrectly classified these users in the country as “wholesale investors.”
The crypto exchange was forced to close the positions after informing the traders to comply with Australian regulations. Binance stated:
We have already contacted all impacted users and will fully compensate them for their losses incurred while trading derivatives on Binance.
Crypto Reacts To Binance’s Decision
Across social media platforms, the decision has stirred debate and controversy. A pseudonym user shared a screenshot of the official message sent by Binance to those Australian traders whose positions were liquidated or “nuke.”
As seen in the image below, the crypto exchange closed the positions of the users incorrectly labeled and their accounts. However, traders can still access the platform to buy and sell crypto on the spot platform.
The exchange requested these users to provide new information to regain access to derivatives, which includes the popular Perpetual Futures Contract. In many jurisdictions, users leverage these contracts to bet on the price of Bitcoin and other cryptocurrencies for a large profit by assuming an equally greater risk.
As the crypto community has pointed out, Binance will compensate these users for their positions. Still, it is unclear whether this action will cover recent or all activity since the accounts were opened. The company wrote:
We are working on a remediation and compensation plan. If we owe you a refund or payment, our Customer Support Team will contact you as soon as possible. We will also contact you if we identity any issues with your current or closed accounts.
As another user pointed out, Australian regulations strictly label an account for retail and institutional customers. Only “sophisticated investors” have access to these accounts.
In Australia you have to meet sophisticated investor classifications to use derivatives. This isn’t anything shocking to be fake
— DeFi Alex (@swaggyAlexyo) February 23, 2023
Binance’s decision comes at the heel of increased regulatory scrutiny from worldwide regulators. In particular, the U.S. Securities and Exchange Commission (SEC) is cracking down on the industry and its main actors, crypto trading venues.
As of this writing, Bitcoin trades at $24,000 with sideways movement in the last 24 hours.