Following the Paxos crackdown, Binance withdrawals

by Feb 14, 2023CryptoNews0 comments

Despite $788 million in net withdrawals at the cryptocurrency exchange over the past 24 hours, Binance withdrawals, and “Funds are SAFU.”

Binance, a cryptocurrency exchange, has experienced a spike in withdrawals over the past 24 hours due to reports that Paxos and its stablecoin Binance USD may be subject to regulatory action.

The BUSD token has also experienced massive redemptions; according to Peckshield, 342 million BUSD were burnt on the previous day.

News of prospective enforcement action against Paxos by the US Securities and Exchange Commission surfaced on February 12. Paxos disputes the claim that the stablecoin is an unregistered security.

Binance withdrawals

Binance withdrawals witnessed 24-hour multichain token net outflows of $788.5 million, as evidenced by data collated by the blockchain intelligence platform Nansen, due to outflows of $2.7 billion, surpassing inflows of around $1.97 billion.

Dune analytics data indicates the highest 24-hour net outflow since Binance’s proof-of-reserve audits were taken off from auditor Mazars’ website on December 17.

According to a representative for Binance, “funds are SAFU” — backed by a Secure Asset Fund for Users — reiterating what Binance CEO Changpeng “CZ” Zhao had previously stated on February 13.

According to the exchange’s spokeswoman, the exchange recently had a sell-off, in which “more than $1 billion” was withdrawn in 12 hours, which it claims “was managed with ease.”

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We have a fairly straightforward business model where we retain assets in custody and earn money from transaction fees, according to Binance.

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

The New York Department of Financial Services (NYDFS) ordered Paxos to stop issuing BUSD on February 13 in response to the SEC’s action and a rumored tip from USD Coin issuer Circle.

Conclusion

The outflows and token burning are a reaction to such occurrences, with cryptocurrency users selling their stablecoins out of concern for more regulatory action.

The majority of the stablecoin, or $14.4 billion, or around 90% of its $16.1 billion market cap, is kept in Binance’s reserves.

The cryptocurrency exchange also has reserves of over $60 billion, 22% of which are BUSD.

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