Binance Customers Withdraw $2.5 Billion In A Matter Of Days

The Binance CEO, Changpeng Zhao, has taken to his Twitter and noted that about $2.5 billion has flowed out from Binance’s stablecoin this week. This comes after the U.S. regulators turned their focus on the cryptocurrency. According to the CEO, most of the money has been transferred from Binance USD to Tether, another so-called stablecoin where tokens have a $1 value. Further Zhao asserted that,’’ Landscape is shifting.’’

BUSD market cap dropped -$2.45B (from 16.1B to 13.7B as of now), and most of it has moved to USDT.

USDT marketcap + 2.37B (From 67.8B to 70.1B)

USDC also declined -739M (from 42.3B to 41.5B)

Landscape is shifting.

(Note: BUSD is NOT issued by Binance.) pic.twitter.com/kVrZUYjuOh

— CZ 🔶 Binance (@cz_binance) February 17, 2023

However, stablecoins are used for both crypto-to-crypto and crypto-to-traditional asset exchanges. Binance USD (BUSD) is ranked as the third-biggest stablecoin behind Tether and USD Coin. As per the analytics website coinmarketcap.com, Tether’s market capitalization, which is the measure of the amount of money held in Tether, increased by about $2 billion this week.

The New York Department of Financial Services recently ordered the Paxos Trust platform, to cease minting tokens. Paxos, was the company behind Binance USD. The New York-based financial provider also asserted that the U.S. Securities and Exchange Commission (SEC) told the platform that it should have registered the stablecoin Binance USD as a security. However, Paxos responded to SEC’s claims by noting:

Paxos categorically disagrees with the SEC staff because BUSD is not a security under the federal securities law. BUSD issued by Paxos is always backed 1:1 with U.S. dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts.

Binance Coin, the crypto exchange’s native token, first declined after receiving the news. However, it has recovered and was last stable at $306.96.

Binance Secret Transfers      

According to a Reuters report, the Global crypto exchange Binance moved a considerable amount of money from the account of a trading firm, Merit Perk, managed by Binance’s CEO. According to the reports, over the first three months of 2021, more than $400 million moved from the Binance.US account to Merit Peak trading firm, as per Reuters’ quarterly banking records and company messages.

Notably, the Binance.US account was registered under the name BAM trading, the United States affiliate of the exchange. On the other hand, the firm messages indicate that the transfers to the trading firm commenced in late 2020. However, a person familiar with the matter stipulated that” an unspecified portion of the funds were subsequently sent to the Silvergate account of a Seychelles-incorporated company. The company is called Key Vision Development Limited.”

However, reports could not determine the reasons for the transfers nor whether any of the funds originated from Binance.US’s users. Nonetheless, the Binance.US representative, Kimberly Soward, stipulated that Reuters reports used “outdated information” as they failed to address the transfers directly. Soward further noted that Merit Peak is neither trading nor providing services on the Binance.US platform.

SEC Chair warns crypto firms

Various trading firms have been under scrutiny since the demise of a giant exchange FTX in November. The trading firms play a market-making function by buying and selling assets to maximize the exchange’s trading volume, hence facilitating dealings. However, the market marker profits from the difference between the prices submitted by buyers and asked by sellers.

The former FTX founder, Sam Bankman-Fried, was accused by the SEC of secretly transferring a massive amount of money to his trading firm, Alameda Research. In this case, Alameda Research functioned as a market maker for the exchange. However, in SEC’s December complaint against SBF, who pleaded not guilty, the SEC stipulated that the trading firm received “undisclosed special treatment” from the FTX company that covered the flows.

On February 10, SEC’s Chair Gary Gensler told Bloomberg TV that all crypto exchange firms are commingling users’ funds with their business. This is possible by exchange companies operating as broker-dealers and hedge funds trading against their customers. Gensler did not rule out any exchange firm, including Binance, as he said that the crypto companies should expect more enforcement actions by the agency.

It is worth noting that Gensler’s warnings to crypto companies call for all crypto firms globally to act right and follow the set rules and regulations by agencies. Doing so would lead to customers rebuilding their faith in crypto and hoping for limitless opportunities in the industry.

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