Binance Temporarily Halts Stablecoin USDC Withdrawals As Investor Concerns Mount Up After FTX Fall

Binance, the world’s largest cryptocurrency exchange, said on Tuesday that it is halting withdrawals of the stablecoin USDC while carrying out a “token swap.” The move comes as investor concerns are growing about the stability of Binance after the collapse of rival exchange FTX as well as reports of a possible criminal investigation from the U.S. government.

Finance officially stated that it has decided to temporarily pause” USDC withdrawals while it conducts a “token swap.” This refers to swapping one cryptocurrency for another without the need for fiat currency.

Changpeng Zhao, the CEO of Binance, wrote in a tweet on Tuesday that the exchange is noticing an increase in withdrawals of USDC. Notably, this cryptocurrency is known as a stablecoin because it is pegged one-to-one with the U.S. dollar.

USDC is generally used by investors to trade in and out of different cryptocurrencies without needing to move money back into U.S. dollars. If traders are withdrawing USDC from Binance, it could mean that they are trying to move it onto another platform.

Zhao said that transfers from the stablecoin known as PAX to USDC, as well as Binance’s own token BUSD, require routing through a New York-based bank that has yet to open. According to Zhao, users are looking to convert their PAX and BUSD to USDC to withdraw their funds from Binance.

A token swap could be a way for Binance to get more USDC fast while banks are closed to resume customers from making any withdrawals. According to Zhao, users can still withdraw other stablecoins including BUSD and tether. He also said that deposits will not be affected. According to data collected from CoinGecko, Binance’s own token called BNB fell nearly 5% on Tuesday morning.

It is not generally never good news if a crypto firm has to pause withdrawals. Over the summer, crypto firms including lender Celsius had to halt withdrawals before eventually filing for bankruptcy. There is no sign of such trouble for Binance.

According to a tweet from crypto data company Nansen which was published early Tuesday, in the past 24 hours, Binance has seen $1.6 billion in outflows from its platform. According to Nansen, Binance has more than $60 billion of assets on its platform. 

Investors jittery 

The collapse of FTX and the arrest of its former CEO Sam Bankman-Fried have crypto investors fearing further contagion across the industry. Binance has been in the spotlight since it made a decision to sell its stake in FTX self-issued FTX digital token, which preceded the failure of rival exchanges.

Investors are calling for more transparency from Binance’s business. Last month, the company issued proof of reserves in which it claimed to have a reserve ratio of 101%.  This indicates that the company has enough assets to cover customer deposits. But critics said the proof of reserves didn’t go far enough to warrant Binance’s bailout. Mazars, the auditing firm Binance used to prove its reserves, said in its five-page report that the company 

expresses no opinion or assurance conclusion. 

Investors are also keeping an eye on a Reuters report stating that US federal prosecutors are delaying the conclusion of a criminal investigation into Binance.  Reuters, citing four people who are familiar with the matter, said the investigation is focusing on Binance’s compliance with anti-money laundering laws. Binance responded by saying: “Reuters has it wrong again.”

The company tweeted on Monday, “We don’t have any insight into the inner workings of the US Justice Department, nor would it be appropriate for us to comment if we did.”

Source- CNBC