Binance Withdrawals Surge as Paxos-BUSD Drama Weighs on the Exchange
Binance has endured some $831 million of net outflows in the past 24 hours, Nansen data shows. Monday’s outflow is the largest in a day since November.
Binance, the world’s largest crypto exchange by trading volume, has endured some $831 million of net outflows in the past 24 hours, according to blockchain intelligence firm Nansen’s data. Investors appear to be spooked by a regulatory crackdown on the Paxos-issued Binance USD (BUSD) stablecoin and so are reducing their holdings on the platform.
Blockchain data on Nansen shows users withdrew some $2.8 billion of digital assets in the last 24 hours, outweighing the $2 billion of deposits during the same period.
The withdrawals have followed the New York Department of Financial Services ordering Paxos on Monday to halt issuing the $16 billion BUSD stablecoin and a looming enforcement action by the U.S. Securities and Exchange Commission (SEC). Issued under the Binance brand, BUSD is the third-largest stablecoin and accounts for 35% of all Binance trading volume.
Monday’s activity also marked the largest, daily net outflows from Binance since November, surpassing December outflows when the exchange’s lackluster report about its reserves alarmed investors, according to a data dashboard by crypto investment product firm 21Shares.
Binance reserves tested, again
The regulator’s action severely wounds the exchange because with some $13.4 billion of BUSD on the platform, BUSD is the largest asset in Binance’s reserves after Tether’s USDT, Nansen data shows. This amount accounts for 22% of the $60 billion of assets on Binance.
Given the large chunk of Binance-related assets on the platform, the withdrawals tested Binance and its reserve assets, Walter Teng, vice president of digital asset research of market analysis firm Fundstrat, wrote to CoinDesk in a Telegram chat.
“Assuming Binance doesn't hold customer deposits 1:1, they might face withdrawal pressure,” Teng said. “On-chain liquidity for BUSD has already dried up, making redemption of BUSD for U.S. dollars or an alternate stablecoin to then meet customer withdrawals as the only viable option.”
Changpeng “CZ” Zhao, chief executive of Binance, assured investors in a tweet that customer funds are safe.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.