Binance, the largest crypto exchange by trading volume, has resumed customer withdrawals to stablecoin USDC Tuesday after announcing a brief stop earlier in the day.
This stop came as Binance saw a massive wave of withdrawals as crypto markets continued to be unstable after the FTX collapse last month.
According to blockchain data platform Nansen, during the 24-hour period ending at 1am on Wednesday, Binance recorded around $3 billion in total outflows, its biggest customer withdrawal event since June.
Assets tracked in Binance-controlled wallets known to Nansen total $59 billion in assets, of which $36 billion is held in the BNB and BUSD tokens that Binance created.
“I wouldn’t be surprised if they are intentionally making it difficult for users to withdraw from USDC while other stables and tokens are being withdrawn with ease,” Conor Ryder, researcher at Kaiko told Yahoo Finance.
As Ryder noted, in recent months Binance has worked to phase out the use of USDC on its platform in exchange for its own stablecoin, BUSD. This means that it converts USDC deposits on its platform to BUSD and must convert them back to fulfill withdrawal requests. The exchange’s BNB token, which is used as a native token for its own blockchain, is used on the platform for fee discounts, like FTX’s failed FTT token.
“If there is any risk that we fail, it all depends on how we fail,” said Binance Founder and CEO Changpeng Zhao during an Ask Me Anything on Twitter.
“As long as we fail with honor and credibility, we allow people to withdraw their funds because the company ran out of money, that’s fine,” added Zhao.
As Zhao pointed out, cryptocurrency exchanges are not banks. This means that when faced with a series of heavy customer withdrawals, cryptocurrency exchanges should still be able to return all of their money to customers, even if the process puts them out of business.
As Reuters reported earlier this week, the Department of Justice is weighing whether to file charges against Binance for violating sanctions and money laundering laws after a multi-year investigation.
Along with other exchanges like Houbi, Bitmex, and Bybit, Binance went to great lengths to publish a proof of reserves report, in addition to a report from audit firm Mazars a week ago.
The Mazars report was an Agreed Procedure (AUP), not an audit, and showed that 97% of Binance’s bitcoin holdings ($9 billion) were collateralised, meaning it had not achieved a 1:1 support from bitcoin deposits for liabilities.
However, the report noted that it did not include “out-of-scope assets,” meaning margin and loans made for BTC in other tokens. With these other tokens, Binance bitcoin deposits would be “101% guaranteed” according to Mazars findings.
When asked why Binance is not showing more transparency around what Mazars called “out-of-scope assets,” Zhao said proving asset reserves “is not as simple an exercise as people think” and that the company will release more information “in the coming weeks.”
“I don’t know exactly,” Zhao said in reference to the timing of the additional booking data. “At Binance, internally, we don’t use a lot of timeframes. People already work too fast. We try not to force it.”
precipitation FTX
On Monday night, FTX founder and former CEO Sam Bankman-Fried was arrested in the Bahamas. On Tuesday, the US Department of Justice, the Securities and Exchange Commission (SEC) and the Commodities and Futures Trading Commission (CFTC) filed charges against the 30-year-old, alleging that he and his company committed fraud by spending deposits. of FTX clients.
The shocking collapse put more than a million customers’ money in the hands of a Chapter 11 bankruptcy and caused major investors from Sequoia, BlackRock, Temasek and the Ontario Teacher’s Pension Plan to write off their equity investments in the stock exchange to zero. .
According to data tracked by blockchain forensics firm Chainalysis, the impact of the FTX collapse proved to be the third biggest sale of digital currencies this year.
In May, the collapse of algorithmic stablecoin Terra (UST) cost crypto holders an estimated loss of $20.5 billion, while the bankruptcies of Three Arrows Capital, Voyager Digital and Celsius Network a month later accounted for as much as $33 billion. in weekly realized losses. 🇧🇷
The demise of FTX left investors with the biggest weekly realized loss of $9 billion. Over the course of this year, the overall value of crypto assets has dropped by around two-thirds.
Recent revelations about FTX’s handling of client funds have also forced many crypto investors to reassess the viability of the emerging asset class, with Capitol Hill hearings this week seeing the industry again under pressure amid an avalanche of criticism from lawmakers.
“FTX is just the latest in a series of major crypto industry failures, failures of centralized crypto intermediaries like Celsius and failures of DeFi offerings like Terra Luna,” said Hilary Allen, a professor at the American University Washington College of Law during a Wednesday in the Senate. Committee on Banking, Housing and Urban Affairs Hearing on FTX.
“These flaws arose in large part because of a unique feature of the crypto industry, crypto assets can be created out of thin air.”
David Hollerith is a senior reporter for Yahoo Finance, covering cryptocurrencies and equity markets. Follow him on Twitter at @DsHollers
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