Users have been withdrawing massive amounts of funds from Binance, including USD coin USDC/USD and other stablecoins. Binance has already seen a net outflow of over $3 billion in crypto assets, in the last seven days, as per Nansen.
How It Started: It all started on Monday when Binance experienced an unprecedented wave of withdrawals due to concerns over its proof of reserve report. According to blockchain intelligence platform Nansen, net outflows – the difference between the total value of assets coming in and going out of the exchange – amounted to an eye-watering $902 million in just one day. This marked a dramatic surge in investor sentiment away from the exchange, raising serious questions about its holdings.
Despite the fact that Binance provides its public wallet addresses for extra transparency, many investors are still uncertain about the degree of the exchange’s transparency. In particular, the wallet balance does not divulge any details about the potential liabilities of Binance.
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In an effort to dispel some doubts, Binance requested a “proof of reserve” report from an accounting firm Mazers to demonstrate the company’s financial solidity. The report showed that Binance had funds to cover over 100% of its depositors.
But, this effort still left critics unsatisfied. Investors ought not to be content with the report, Douglas Carmichael, a Baruch College in New York Accounting Professor and former chief auditor of the U.S. Public Company Accounting Oversight Board, professed. “I can’t imagine it answers all the questions an investor would have about the sufficiency of collateralization,” Carmichael told Wall Street Journal.
Mazers made it clear that their report does not guarantee the continued validity of Binance’s reserve fund and it was simply a “snapshot” of Binance’s reserves at the time of auditing, on Nov. 22.
On Monday, Reuters reported that U.S. prosecutors are analyzing criminal facts for a potential money laundering case against Binance. Changpeng Zhao, CEO of Binance told users on Twitter to “ignore the FUD” — crypto lingo for rumor-mongering.
Uneasiness Continued: A deep sense of worry and concern for the health of Binance pervaded the market on Tuesday. This apprehension was likely intensified by reports that Tron’s Justin Sun had withdrawn $50 million from Binance. The anxiousness in the market was palpable and the news of the withdrawal further added to the unease.
Binance tweeted that it was temporarily suspending USDC withdrawals as it engages in a token swap between USDC and BUSD BUSD/USD (which is administered by Paxos). Zhao acknowledged an upsurge in USD Coin withdrawals from Binance and went on to explain that swapping from PAX/BUSD to USDC necessitates going through a banking service in New York in USD. He further noted that banks were yet to open a few hours from his statement, at which point normalcy would be expected to be restored.
The Allies: Sun sought to allay market concerns by tweeting a link to Etherscan displaying his depositing of $100 million in USDC back into the exchange.
Tether USDT/USD declared their collaboration with Binance on a chain swap that includes the exchange of 3 billion USDT from the Tron network to the Ethereum network. The total supply of Tether is not expected to be affected in this process. “In a few minutes, Tether will coordinate with Binance to perform a chain swap, converting from Tron TRX/USD to Ethereum ETH/USD ERC20, for 3B USDT. The tether total supply will not change during this process,” Tether said.
Binance then resumed processing withdrawal requests of the USD Coin stablecoin after pausing them for several hours.
Stress Test: According to Zhao, the exchange has seen this before, and he believes “it is a good idea to ‘stress test withdrawals’ on each CEX [centralized exchange] on a rotating basis”.
Layah Heilpern, a Bitcoin BTC/USD enthusiast, noted that “if Binance goes down, everything else will crumble.” She further pointed out that while Bitcoin may remain, the whole cryptocurrency landscape, such as stablecoins, will not survive.
Image and article originally from www.benzinga.com. Read the original article here.