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Binance withdrawals and BUSD redemptions surge post Paxos crackdown

Net outflows at the cryptocurrency exchange hit $788 million over the last 24 hours, however, Binance told Cointelegraph that “Funds are SAFU.”

Cryptocurrency exchange Binance has seen a surge of withdrawals over the last 24 hours as investors appear to be spooked over recent news of regulatory action against Paxos and its stablecoin Binance USD (BUSD).

At the same time, the BUSD token has recorded significant redemptions, with 342 million BUSD burned over the last 24 hours according to Peckshield.

On Feb. 12, news broke that the United States Securities and Exchange Commission gave notice of potential enforcement action against Paxos. It alleged the stablecoin is an unregistered security, an assertion that Paxos denies.

Data compiled from the blockchain intelligence platform Nansen show that Binance recorded 24-hour multichain token net outflows of $788.5 million, caused by outflows of $2.7 billion exceeding inflows of around $1.97 billion.

According to Dune analytics data, it’s the largest 24-hour net outflow since Dec. 17, when Binance’s ​​proof-of-reserve audits were removed from auditor Mazars’ website.

A spokesperson for Binance told Cointelegraph that “funds are SAFU” — backed by a Secure Asset Fund for Users — echoing what Binance chief Changpeng “CZ” Zhao said earlier on Feb. 13.

The spokesperson added that the exchange recently had a sell-off with “more than $1 billion” withdrawn in a 12-hour period, which it claims “was managed with ease.”

“We run a very simple business model — hold assets in custody and generate revenue from transaction fees,” Binance said, adding:

“We take our responsibility as a custodian seriously and maintain 1:1 backing for every user asset.”

Following the SEC’s action and a reported tip-off from USD Coin (USDC) issuer Circle, the New York Department of Financial Services (NYDFS) ordered Paxos to halt the issuance of BUSD on Feb. 13.

Related: Are stablecoins securities? Well, it’s not so simple, say lawyers

The outflows and token burns seemingly are a response to those events, with crypto users cashing out of the stablecoin over fears of further regulatory action.

Binance’s reserves harbor the largest amount of BUSD, holding $14.4 billion worth of the stablecoin, or around 90% of the $16.1 billion current market cap.

The crypto exchange also has around $60 billion worth of reserves, with 22% of that made up of BUSD.

CoinList addresses ‘FUD’ on withdrawals, cites technical issues for delays

CoinList blamed “custodian issues” with one suffering an outage affecting “many tokens” on the platform as the reason for reported withdrawal problems.

Cryptocurrency exchange and initial coin offering (ICO) platform CoinList took to Twitter to address “FUD” after a blogger tweeted that users reported being unable to withdraw funds for over a week, sparking fears the company was having liquidity issues or w insolvent.

“There is a lot of FUD going around that we would like to address head-on,” CoinList said in a Nov. 24 Twitter thread that stated that the exchange is “not insolvent, illiquid, or near bankruptcy.” It said, however, that its deposits and withdrawals are affected by “technical issues.”

Crypto-focused blogger Colin Wu had earlier tweeted to his 245,000 followers that “some community members” using CoinList have been unable to withdraw for over a week due to maintenance.

CoinList has a $35 million creditor claim with bankrupt crypto hedge fund Three Arrows Capital which Wu said in his tweet was a “loss,” that likely triggered concerns the company was insolvent or illiquid.

Looking to dampen fears that have seen bank runs on other platforms, CoinList explained that an upgrade to its internal systems and a migration of wallet addresses that involves “multiple custodians” is being undertaken.

The company cited unexplained “custodian issues” as the reason a selection of cryptocurrencies “are taking longer than anticipated to migrate,” with one of its unnamed custodian partners suffering from an “outage […] unrelated to the migration” on Nov. 23, which impacted tokens on the platform.

Its status page shows “degraded performance” for withdrawals, with four cryptocurrencies unavailable for withdrawal since Nov. 15 and one experiencing delayed deposits since Nov. 16.

“Once again, this is purely a technical issue, not a liquidity crunch,” CoinList said. It claimed to hold “all user assets dollar for dollar” and noted it plans to publish its proof of reserves.

Cointelegraph has contacted CoinList for more information but did not immediately receive a response.

Related: FTX illustrated why banks need to take over cryptocurrency

CoinList claimed on Nov. 14 that it had no exposure to the now-bankrupt FTX exchange, but users are increasingly nervous about centralized platforms and have rushed to ensure safe custody of their assets as evidenced by the surge in sales reported in mid-November by hardware wallet providers Trezor and Ledger.

Around the same time, outflows of Bitcoin (BTC) and stablecoins from exchanges hit historic highs, and a corresponding uptick in activity was seen on decentralized exchanges.