On June 19, 2020, Changpeng (CZ) Zhao, CEO of leading exchange Binance, took to twitter to encourage crypto platforms on implementing Responsible-Trading features.
This comes after news broke that a 20-year-old University of Nebraska student took his own life after his Robinhood account, which is a popular free stock-trading app, showed a massive negative balance.
Forbes first reported on the incident, citing screenshots of a negative $730,000 cash balance in Alexander Kearns’ account. Robinhood offers a mobile app and website that offers people the ability to invest in stocks, ETFs, and crypto trading.
CZ reacted to the news stating:
“This is truly a sad story. @Binance is probably one of the first crypto exchanges to implement Responsible-Trading features in our products. Here is a blog article from last month on it: https://t.co/J8Sq6IBhb1.”
Commission-free trading is increasingly luring younger consumers, many of whom don’t fully comprehend the securities and markets they are tinkering with.
CZ Highlights the Responsibility of Exchanges
Following Kearns’s death, the CEO of Binance has come out strongly to highlight the importance of cautionary notices when trading high-risk products such as options.
CZ went on to point to an official announcement where Binance explains what responsibility features it has implemented, urging people to be extra careful.
Among the many measures implemented on the platform is the Anti-Addiction Notice, which momentarily bans users who have had consecutive losing trades.
When a user experiences a losing streak or suffers a heavy loss, the leading exchange continuously reminds them of the risk involved in trading and encourages them to hold back on trading activities.
Binance also notes that every exchange is responsible for educating its users, as much as it is for enabling user access to the products.
According to the exchange, traders also have a role to play in terms of practicing self-discipline and taking responsibility for their actions.
Indeed, most rookies approach trading with a speculative mentality, and they don’t carefully outline a plan on how they would approach the markets.
Binance advocates for traders to avoid unhealthy excesses like compulsive-trading or gambling, and to never risk money that they can’t afford to lose.
Robinhood Negative Cash Balance Was Just Temporary
Robinhood revealed that the massive negative balance on Kearns’s account was likely due to complex options trades, which often settle over concurrent days, leaving a provisional balance during the interim.
Unfortunately, Kearns did not comprehend that the negative balance reflected on his Robinhood app was just temporary and would be adjusted as soon as the underlying stock was credited to his account.
Following the suicide incident, Robinhood says it has reached out to the family and is “committed to continuously improving” its platform.