How Do Unregulated Offshore Crypto Exchanges Offer Much Higher Leverage?
Unregulated offshore exchanges are not subject to the strict minimum margin requirements set by US regulators like the CFTC. They can set their own, much lower, initial margin requirements, which translates directly to offering higher leverage (e.g.
100x or more). This attracts high-risk traders but exposes them to much greater liquidation risk, as a small price movement can wipe out their entire margin deposit.
Glossar
Higher Leverage
Exposure ⎊ Higher leverage fundamentally increases a trader's market exposure by allowing control of a larger notional position with a smaller amount of capital.
Offshore Crypto Exchanges
Venue ⎊ Offshore crypto exchanges operate outside the primary regulatory jurisdiction of major financial centers, often offering higher leverage and fewer restrictions on derivative products to global users.
Margin Requirements
Definition ⎊ Margin requirements refer to the minimum amount of capital an investor must deposit and maintain with a broker or exchange to open and sustain a leveraged position in derivatives trading.
Offshore Crypto
Jurisdiction ⎊ Offshore crypto operations frequently leverage jurisdictions with favorable regulatory environments and tax regimes, often situated outside traditional financial centers.
Offshore Exchanges
Exchange ⎊ Offshore Exchanges are trading venues for cryptocurrency derivatives that operate outside the primary regulatory purview of major financial centers like the United States or the European Union.