Binance Suffers $1Bn Outflow in One Day as Crypto Jitters Spread

FT/

Investors have pulled more than $1bn from Binance as the world’s largest cryptocurrency exchange fights against a crisis of confidence in digital tokens and fears it will also be drawn into US investigations.

Changpeng Zhao, chief executive of Binance, said the exchange had experienced $1.14bn in net withdrawals on Tuesday as users continued to remove their assets from his marketplace.

Net withdrawals over seven days had topped $3.6bn, according to an analysis conducted by blockchain research group Nansen.

The outflows underscored the nervousness swirling around crypto markets since the collapse last month of FTX, one of the largest companies in the industry. FTX founder Sam Bankman-Fried was charged with fraud in the US on Tuesday.

Nansen said the rapid withdrawals were the largest since June, when the digital assets market was embroiled in an unprecedented market crash that saw popular tokens plummet in value.

Zhao played down the scale of these redemptions, insisting it was “Business as usual for us.” “Some days we have net withdrawals; some days we have net deposits,” Zhao said on Twitter.

Investors have pulled record levels of bitcoin from crypto exchanges in the past month on concerns over the safety of their assets. Crypto exchanges like Binance take custody of clients’ assets alongside offering a trading venue.

Binance said it has more than $60bn in assets, sufficient funds to honour withdrawals. However, the company’s disclosures do not include its liabilities making it difficult to ascertain its financial health. The exchange told the FT all client deposits are backed by corresponding assets and that its “capital structure is debt free.”

Concerns about Binance intensified this week after a report by Reuters on Monday that Binance faces a criminal investigation in the US over its handling of US money laundering and sanctions laws. Binance said it would not be appropriate to comment on any US investigation.

“Regulators are doing a sweeping review of every crypto company against many of the same issues. This nascent industry has grown quickly and Binance has shown its commitment to security and compliance,” the company said. Earlier this week it said it had responded to more than 47,000 law enforcement requests over the past year.

The exchange on Tuesday said it temporarily paused withdrawals of USDC, a crypto token that matches the value of the US dollar, while it conducted a “token swap” involving the coin. It has subsequently restarted withdrawals while other so-called stablecoins tracking the dollar were unaffected, it added.

Editor