Binance hits US$3 billion in withdrawals in 24 hours

Alarm bells went up as Binance saw hefty withdrawals on Tuesday.

Binance hits US$3 billion in withdrawals in 24 hours
Smartphone with displayed Binance logo and representation of cryptocurrencies placed on a keyboard in this illustration taken November 8, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

As we touched on yesterday, FTX's srehocking collapse triggered a wave of calls for regulating the crypto industry, and its founder Sam Bankman-Fried was arrested this week for defrauding investors. And, since September, US prosecutors have been on the world's largest cryptocurrency exchange Binance's and CEO Changpeng Zhao's neck with a long-running criminal investigation into compliance with anti-money laundering requirements. Last week, Binance released a proof-of-reserves report on Twitter from an audit firm to show that it's doing alright and has enough crypto assets to balance its liabilities.

But alarm bells went up as Binance saw hefty withdrawals on Tuesday, reportedly amounting to a little over US$1 billion. Although this was a record amount of withdrawals, Zhao assured Binance customers on Twitter that this was "business as usual" and nothing to be concerned about. A separate post that same day from research firm Nansen said the outflow that day had reached US$3 billion.

Nansen data on Wednesday showed the figure had fallen to around US$80 million. Although the deposits are coming back in, according to Binance, the sudden outflow raised concerns about the company's overall liquidity. A Binance spokesperson has said all users' assets are backed 1:1, and the company is debt-free. Zhao sent a memo to employees this week saying that, although the road after FTX may be bumpy, the company is financially strong and "will survive any crypto winter."

Key comments:

"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. Business as usual for us," said Binance CEO Changpeng Zhao on Twitter.

"As part of # Binance's user fund transparency work and Proof of Reserves updates, we're working with digital assets experts at global financial audit, tax and advisory firm, @Mazars_SA. The first report from Mazars about Binance's $BTC Proof of Reserves has been published today," said Binance on Twitter last week.

"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," said Dante Disparte, Circle's chief strategy officer and head of global policy.

"While we expect the next several months to be bumpy, we will get past this challenging period – and we'll be stronger for having been through it," wrote Binance CEO Zhao in a memo sent to staff and seen by Bloomberg.