Why do exchanges impose withdrawal limits?

Exchanges impose withdrawal limits to manage operational risk and comply with financial regulations. These limits serve several purposes: they prevent fraud by restricting suspicious account activity, reduce the exchange's exposure if hacked, and help meet anti-money laundering (AML) requirements. Limits typically increase based on account verification level—unverified users might withdraw $500 daily, while fully verified accounts could withdraw $50,000 or more. During extreme market volatility or system maintenance, exchanges may temporarily lower limits. Some platforms use withdrawal limits to encourage users to keep funds on their platform for trading. Higher limits usually require identity verification and proof of address, ensuring compliance with financial regulations worldwide.