Binance Receives Backlash After Announcing FTX Token Delisting

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Binance and its CEO Changpeng Zhao were on the receiving end of some harsh criticism this weekend as the platform announced that it was delisting 20 recently added FTX leveraging pairs, citing a “lack of understanding of how leveraged tokens work”. The short-lived addition has seen users lose thousands of dollars in the space of a few weeks and led to a slew of complaints, causing the platform to act and axe the tokens.

Binance Blames Users

Binance announced the delisting of the 20 leverage trading tokens on Saturday less than three weeks after they were introduced, seemingly laying the blame at the feet of users:

Due to lack of understanding of how leveraged tokens work by many of our users, Binance has decided to delist all existing FTX leveraged tokens and corresponding trading pairs, and will stop trading at 2020/03/31 10:00 AM (UTC).

The tokens, which were created by cryptocurrency derivatives exchange FTX, allow users to engage in a form of leverage trading without having to take on margin trading risk. Binance added BNBBULL and BNBBEAR options to their platform in March 11 and eventually extended the offering to another 18 pairs, giving users the chance to long and short a whole variety of tokens.

However, Binance says that users had failed to realize that the dollar value of their trade could drop even if the value of the BULL/BEAR tokens regained their value regained after a fall. This likely left the customer service team experiencing a sudden influx of angry users, which had led Zhao to make this decision.

CZ Gets the Blame

The reaction the announcement was far from positive, with many people citing money they have lost on the enterprise:

Following the backlash, Zhao took to Twitter to try and explain the decision and the token dynamics, albeit a little too late:

He went further in a series of Tweets later in Saturday, ending on a somewhat fractious note:

Binance Receives Backlash After Announcing FTX Token Delisting

This final comment smacks of Zhao losing patience and letting his customer friendly veneer slip. The fact that Binance is blaming its user base for the entire episode represents a new low in what has been a torrid nine months for the platform and Zhao himself.

While Zhao and Binance may have messed up in the way they communicated their decision,, they are actually correct in many ways. Binance did produce a lengthy explainer guide on leveraged tokens, but the reality is that most people likely found it too cumbersome to read and just went ahead and bought the tokens. Then when they inevitably lost money they complained to Binance, who soon began to realize that people didn’t know what they were doing with the tokens, and rather than make further efforts to educate them, sacked off the whole thing.

No Such Issues for FTX

FTX, the exchange that first launched the concept of a leverage token, has a much more specialized user base who are well aware of the concept of margin trading and can readily adapt to new iterations of it. Binance however is more of a retail exchange where users are less savvy, and so it is no surprise that people jumped into the tokens before reading the admittedly lengthy educational material.

Some blame could perhaps be levelled at Binance for not making the dangers clear enough or the guide a little less onerous, but at the end of the day it is up to the users to educate themselves on the whys and wherefores of new products before jumping into them. To put this into context, FTX seems to have had no issue with the BEAR/BULL tokens on the platform, largely because their users are more educated in the concept.

Hopefully the experience has taught Binance that it has to understand its customer base better before launching new products, and equally has taught people to educate themselves before engaging in such products. In all likelihood however, this is unlikely.