The major crypto exchange Binance has seen a whopping $2.2 billion in outflows after news broke that it has been sued in the US by the Commodity Futures Trading Commission (CFTC).
The lawsuit, which alleged that Binance offers “unregistered securities” to retail users in the US, was announced by the CFTC on Monday this week. And Binance customers have taken notice, to say the least.
Citing data from Ethereum tracking platform Nansen, the Wall Street Journal this week said as much as $2.1 billion of net outflows have been seen on Ethereum alone over the past seven days. In addition comes withdrawals made on other networks, including popular blockchains like Bitcoin, Tron, and Binance’s own BNB Chain.
The massive amount comes from Binance’s total holdings in publicly known wallets, which at the time was worth some $63.2 billion.
Commenting on the withdrawals in the Wall Street Journal article, Nansen analyst Andrew Thurman, called the level of withdrawals “heightened compared to normal activity,” while noting that the activity picked up after the CFTC announcement.
But despite being higher than normal, Thurman also pointed out that Binance has seen higher levels of withdrawals before. One of those time was last month, when regulators in New York banned Paxos from issuing any more of the popular Binance USD (BUSD) stablecoin.
BUSD is issued by Paxos, a regulated trust company in New York, on behalf of Binance, which operates globally under a myriad of international regulatory frameworks.
Following the ban, Binance CEO Changpeng Zhao said that Paxos “will continue to service the product, and manage redemptions,” while also admitting that the halt in new BUSD minting means users will likely migrate to other stablecoins “over time.”
Meanwhile, another headwind that Binance has recently brought upon itself is the return of trading fees on bitcoin trading pairs, which could be a reason behind both the withdrawals and generally lower trading volumes seen on Binance recently.
As one of just a few in the industry, Binance previously offered fee-free trading on all bitcoin pairs, which unsurprisingly led to a huge jump in trading volume. But now that the trading fees are back, some traders, including algorithmic traders that are responsible for huge volumes, may have started to look to other exchanges, adding to the withdrawals.
Commenting to the Wall Street Journal, John Quarnstrom, a portfolio manager at crypto hedge fund Iceberg Capital, said fees are “extremely important” in the crypto space.
“Generally I’ll make a decision to trade on an exchange first and foremost on its custodial aspect; the second is the fees for sure,” he said.
And for those worried about Binance’s ability to honor all the withdrawals, the exchange – as usual – said there is no cause for concern.
“[We have] more than enough funds to fulfill withdrawal requests,” a spokeswoman for Binance was quoted by the Wall Street Journal as saying.
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