Investors suddenly withdraw 3 billion USD in just 1 day, will Binance “follow” FTX and cause the world’s largest cryptocurrency exchange crash?

Tram Ho

Last week, Binance customers withdrew billions of dollars from the crypto platform. Investors are wary of similar signs that this exchange faces after the shocking collapse of FTX – the once-popular $32 billion cryptocurrency empire.

Here are 5 problems that are happening at Binance and the reasons why the crypto investment community is afraid.

Concerned about Binance holding customer funds

After FTX went bankrupt, many people realized that the “pockets” of these companies were really empty. As a result, these exchanges are under pressure to prove to customers that it is safe for customers to “send” money and can pay quickly if there is an urgent withdrawal request.

Additionally, Reuters reported that the founder of FTX, Sam Bankman-Fried, had quietly transferred at least $4 billion of client funds to his own trading firm, Alameda Research, after the company invested losses.

Meanwhile, Binance is working to revive customer confidence in their business, issuing a “proof of reserves” report. The crypto exchange hires accounting firm Mazars to verify its holdings, with the aim of reassuring customers that their funds remain in the company’s account and are not being taken away.

However, legal experts and others said that the platform’s customers should not take the Mazars report too seriously as details have yet to dig into the effectiveness of Binance’s financial controls. While the report shows that Binance’s financial position remains solid, the company’s Bitcoin investment liabilities are $245 million higher than their net worth, according to the WSJ.

Bloomberg reports that nearly half of the company’s $75 billion in reserves are in the form of stablecoin BUSD and its digital currency Binance coin (BNB).

On Friday, Mazars stopped working with Binance in proving the reserves of the exchange and other customers, due to concerns about how the public understands their reporting, the FT reported.

In just 1 day, Binance customers have netted 3 billion USD

In recent days, the exchange has also witnessed a rapid cash outflow, as more and more people question Binance’s reserve assets and the US Department of Justice (DOJ) is planning a meeting. investigate. Meanwhile, Bankman-Fried’s arrest also made the crypto community concerned about this asset class.

Last Tuesday, Binance saw the most withdrawals since June, with $3 billion in just 24 hours, according to Nansen data. The exchange was forced to temporarily suspend USD Coin withdrawals while increasing its holdings for the stablecoin.

Nansen reported that just over a month ago, the crypto giant held $69.5 billion in digital assets in publicly detailed “wallets.” Meanwhile, the above amount is currently 54.7 billion USD due to the influence of the last withdrawal and the price fluctuations of cryptocurrencies.

US Department of Justice investigates Binance for money laundering

One issue that “adds fuel to the fire” is the news that the DOJ is investigating Binance for compliance with the company’s financial crime rules.

Reuters reports that prosecutors are considering whether to bring criminal charges against founder Changpeng Zhao and guest executives. Those offenses would include conspiracy to launder money, unlicensed money transfer and criminal sanctions violation.

Reuters estimates that Binance processed more than $10 billion in illegal transactions by 2022 and says it is trying to evade regulators – something the exchange is protesting against.

CZ is not confused and insists that they are still operating normally

CZ made every effort to assuage customers’ concerns about Binance’s liquidity issues. He opposed what is known as “FUD” – the spreading act of fear, uncertainty and unfounded suspicion.

CZ told CNBC on Thursday: “People can withdraw 100% of their money on Binance. We never had any problems. Crypto businesses have to hold users’ assets and that’s what we do.”

Earlier last week, CZ said that the massive withdrawal of investors is still a normal activity of the exchange. And after Binance lifted the requirement to freeze withdrawals with USDC, he said it was a “pressure test” to build credibility for the exchange’s resilience.

CZ still warns about the “bumpy road” ahead

Although the issues causing concern are no longer intense, uncertainties still exist. CZ told employees that the FTX issue raised “a lot of conundrums and triggered increased scrutiny” of Binance.

“While we anticipate some difficulties in the next few months, we will get through this challenging period,” he said. We’ll be stronger once we’ve gone through.”

Reference BI

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Source : Genk