Crypto Exchanges Should Cease Performing Like Casinos in Wake of Robinhood Suicide: bitFlyer COO

The suicide of a 20-year-old Robinhood dealer must 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 often as potential, usually 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 can be run like casinos and exploit their clients,” he mentioned.

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

It later got here to gentle that the adverse steadiness was a brief section in between contract execution – i.e. Kearns wasn’t truly within the pink. However Robinhood has come underneath heavy criticism for permitting novice merchants to entry such complicated 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, comparable to tightening eligibility necessities for complicated choices trades.

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

“I’d 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 trade 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 trade ranks ninth globally, in accordance with CoinGecko, and is the market chief in Japan.

It was reported final summer season a Chinese language bitcoin dealer killed himself after a 100x place on derivatives trade BitMEX was liquidated, a lack of about $16.four million in a single commerce. Across the identical time, an nameless pupil dealer mentioned he was having suicidal ideas after dropping 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 at all times 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 an analogous request by press time.

See additionally: BitMEX Sees Greatest 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 buyers, each in crypto and in conventional belongings, comparable to equities. Japan’s Monetary Providers Company (FSA) halved most leverage down to 2 occasions the worth of the deposit this 12 months.

As such, there’s no cause an trade ought to provide 100x leverage on high of extremely risky belongings 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 a accountability to supply merchandise which can be appropriate to our shoppers,” he added. The Robinhood suicide “is what occurs when corporations deal with tech and income moderately than doing the fitting factor for his or her clients.”