Binance has registered $1.9 billion of withdrawals in the past 24 hours, blockchain data firm Nansen said on Tuesday, as the world’s biggest crypto exchange said it had “temporarily paused” withdrawals of the USDC stablecoin.
How crypto exchanges such as Binance and its now-bankrupt former rival FTX handle customer deposits is under close scrutiny from users and regulators. FTX founder Sam Bankman-Fried was charged by the U.S. Securities and Exchange Commission on earlier today with defrauding investors.
Binance, whose dominance of crypto was cemented by the fall of FTX, last week tweeted a so-called proof-of-reserves report by audit firm Mazars. The report showed its holdings of Bitcoin exceeded customer deposits on a single day in November.
The $1.9 billion of withdrawals of tokens based on the Ethereum blockchain mark the largest daily outflow over a 24-hour period since June 13, the Nansen data showed, and accounted for the majority of the funds being pulled in the last seven days.
“Binance’s withdrawals are increasing due to the growing uncertainty about its reserves report,” a Nansen spokesperson said.
The withdrawals were “business as usual,” Binance CEO Changpeng ‘CZ’ Zhao 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.”
A Binance spokesperson earlier said it always had “more than enough funds” to meet withdrawal requests. “User assets at Binance are all backed 1:1 and Binance’s capital structure is debt free,” the person said.
Asked whether Binance had enough USDC to meet USDC withdrawal requests, the person added it may need to move funds to online “hot” digital wallets from offline wallets, convert stablecoins from one another or carry out network upgrades, sometimes causing delays.
Binance said in a tweet around 1654 GMT that USDC withdrawals had resumed.
Crypto news outlet CoinDesk reported earlier that Binance saw outflows of $902 million on Monday.
Binance is already under pressure from authorities. Splits between U.S. Department of Justice prosecutors are delaying the conclusion of a long-running criminal investigation focused on Binance’s compliance with U.S. anti-money laundering laws and sanctions, Reuters reported on Monday.
The report sparked a drop of almost 4% in Binance’s BNB token, traders told Reuters.
Earlier on Tuesday, Binance halted withdrawals of USDC, citing a “token swap” – where digital token holders exchange their crypto coins, typically over different blockchains.
“On USDC, we have seen an increase in withdrawals,” Binance’s Zhao tweeted at around 0820 GMT.
Binance said in September it would automatically convert user balances and new deposits of USD Coin and two other stablecoins into its own stablecoin, Binance USD.
Zhao said on Tuesday swapping USDC with two other tokens – Paxos Standard and Binance USD – requires using traditional dollars at a bank in New York. “The banks are not open for another few hours. We expect the situation will be restored when the banks open.”
USDC, issued by U.S.-based firm Circle, is the world’s second-biggest stablecoin. Dante Disparte, Circle’s chief strategy officer and head of global policy, said that there will be “challenges” relating to liquidity and redemptions when assets are swapped in the way Binance has done with USDC.
“The feature of liquid dollar digital currencies should be that they are redeemable on demand, and at par at all times, even during conditions of stress,” Disparte added.