Binance Raises Leverage on Samsung, SK Hynix Contracts to 50x, Sparking Gambling Concerns
Summary
- Binance, the world’s largest cryptocurrency exchange, has introduced derivatives offering up to 50x leverage on Samsung Electronics and SK Hynix.
- On Binance, investors can add up to 50x leverage to KORU, a 3x leveraged Kospi ETF, effectively creating a 150x leveraged product.
- The report said the absence of regulation for these high-risk products is fueling concerns over consumer protection for domestic investors and a potential drain of investment demand from South Korea’s local market.
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Concerns are growing over the volatility of 2x leveraged exchange-traded funds tied to Samsung Electronics Co. and SK Hynix Inc. on South Korea’s stock market. Now offshore cryptocurrency exchanges are offering derivatives with leverage of as much as 50 times on the same stocks.
Binance, the world’s largest cryptocurrency exchange, introduced products earlier this month that allow investors to trade Samsung Electronics, SK Hynix and Hyundai Motor Co. with up to 20 times leverage, according to the digital-asset industry on June 28. After strong investor demand, Binance has since raised the maximum leverage on its Samsung Electronics contract, SAMSUNGUSDT, and SK Hynix contract, SKHYNIXUSDT, to 50 times.
With few investment restrictions, anyone with a South Korean won deposit and withdrawal account can buy Tether on domestic crypto exchanges such as Upbit and Bithumb, then transfer it to Binance for trading. The products carry risks far beyond anything available in South Korea’s domestic market, and a sizable number of local investors are believed to be trading them this way.
Binance also offers futures tied to the Kospi with leverage of as much as 150 times. Investors can add up to 50 times leverage to KORU, a 3x leveraged Kospi ETF listed in New York. That means a 1% rise in the Kospi could deliver gains of as much as 150%, while even a slight decline could wipe out an investor’s entire principal.
Trading volume in KORUUSDT reached $754.4 million over the five days from June 22 to June 26, equivalent to about 1.1586 trillion won. Cumulative turnover in SKHYNIXUSDT from June 2 to June 26, less than a month after trading began, climbed to $6.4213 billion, or about 9.8618 trillion won.
The problem, the report said, is that South Korean financial authorities have no regulations in place for speculative products that are effectively akin to gambling. Products that could neither be launched nor listed in the domestic market are trading openly on offshore crypto exchanges, making consumer protection difficult and raising concern that investor demand is being diverted from South Korea’s own markets.
Kim Bong-gu, Hankyung.com reporter, kbk9@hankyung.com
Korea Economic Daily
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