Binance Pauses Stablecoin USDC Withdrawals Following Cryptocurrency FTX Collapse

Binance, the largest cryptocurrency exchange in the world, temporarily halted withdrawals of the stablecoin USDC while it conducted a "token swap." This entails dealing solely in cryptocurrency rather than in traditional currency, said CNBC.

Binance's CEO, Changpeng Zhao, stated that users withdrew more USDC, a cryptocurrency classified as a stablecoin, because its value is fixed at $1.

With USDC, traders may instantly buy and sell various cryptocurrencies without converting their funds back into U.S. dollars.

Traders are pulling USDC out of Binance to move it to another trading platform.

According to Zhao, any USDC deposits made with the stablecoin PAX or Binance's token BUSD need to go via a New York bank.

Zhao claims that to withdraw funds from Binance, users are exchanging PAX and BUSD for USDC.

Binance may be able to purchase additional USDC quickly through a token swap to resume customer withdrawals if banks do not reopen.

However, Zhao assured consumers that they could still withdraw BUSD and tether. He assured them that their deposits would not be impacted.

Binance Withdrawals Reached $1.9 Billion in 24 Hours

Nansen, a blockchain data business, stated on Tuesday that Binance had processed $1.9 billion in withdrawals over the previous 24 hours, even though the largest cryptocurrency exchange in the world has "temporarily suspended" USDC withdrawals.

Based on data from Nansen, the $1.9 billion in token withdrawals based on the ethereum blockchain constituted the largest daily outflow over 24 hours since June 13.

As one Nansen spokesman put it, "Binance's withdrawals are increasing due to the mounting ambiguity around its reserves report."

Binance CEO tweeted, "We saw some withdrawals today (net $1.14b ish). We have seen this before. Some days we have net withdrawals; some days we have net deposits," stating that the withdrawals were "business as usual."

According to Reuters, a representative for Binance has previously indicated that there is "more than adequate liquidity" at all times to process withdrawal requests.

Binance's capital structure is debt free, and all user assets are backed 1:1, the person said.

In response to a question about whether Binance had sufficient USDC to fulfill USDC withdrawal requests, a representative explained that the exchange might be required to move funds to online "hot" digital wallets from offline wallets, convert stablecoins from one another, or perform network upgrades, which can cause delays.

FTX Collapse Worries Binance Investors

When the FTX exchange went down last month, investors worried about a domino effect throughout the industry.

After U.S. officials filed criminal charges against Sam Bankman-Fried, former CEO of FTX, he was arrested in the Bahamas on Monday night.

Worries about Binance have been rising in recent weeks, Forbes noted.

The exchange generated the first proof-of-reserves report to reassure customers that the platform had adequate reserves to cover all client balances.

Industry insiders, however, are left with more questions than answers.

The former SEC commissioner John Stark told Decrypt that Binance's report lacked an "assurance conclusion" and did not address internal financial controls.

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Written by: Bert Hoover

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