Crypto firm Binance says deposits returning after heavy withdrawals

THE head of major crypto exchange Binance said on Wednesday (Dec 14) deposits were returning, a day after it saw heavy outflows of cryptocurrencies and halted some stablecoin withdrawals.

On Tuesday, blockchain data firm Nansen said Binance saw withdrawals of US$1.9 billion in 24 hours, the largest such outflow since June. Users had pulled out US$3.7 billion in crypto over the seven days to Tuesday, it later added.

Binance, the world’s largest crypto exchange, also temporarily halted withdrawals of the major USDC stablecoin, citing a so-called “token swap”.

“Things seem to have stabilised,” chief executive officer Changpeng Zhao tweeted. “Yesterday was not the highest withdrawals we processed, not even top five.”

Binance has seen net inflows in the last 24 hours of tokens on the Ethereum blockchain totalling around US$718 million, Nansen told Reuters.

Customers pulled funds from Binance’s platform amid a lack of confidence in the crypto sector, following the implosion of FTX.

Sam Bankman-Fried, FTX’s co-founder, has been charged with fraud for allegedly misappropriating billions of dollars of customer money.

Zhao also sought to reassure his employees, saying in a memo to staff that Binance is in a strong financial position and “will survive any crypto winter”. 

“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,” he wrote in the memo, which was seen by Bloomberg News. 

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How crypto exchanges such as Binance and its now-bankrupt former rival FTX handle customer deposits has come under close scrutiny from users, regulators and policymakers.

Responding to questions about the recent outflows and concerns about transparency, a Binance spokesperson said: “People deposit and withdraw assets every day for a variety of different reasons. User assets at Binance are all backed 1:1 and Binance’s capital structure is debt-free.”

“We maintain hot wallet balances to ensure that we always have more than enough funds to fulfil withdrawal requests and we top up hot wallet balances accordingly,” the Binance spokesperson said. Hot wallets are digital repositories for tokens that are connected to the Internet.

Binance in a November blog post shared details of digital-asset wallet addresses with tokens worth about US$69 billion. 

The exchange is also facing legal pressures. Splits between US Department of Justice prosecutors are delaying the conclusion of a long-running criminal investigation focused on Binance’s compliance with US anti-money laundering laws and sanctions, Reuters reported on Monday, sparking a 4 per cent drop in Binance’s own BNB token.

Nansen CEO Alex Svanevik told CNBC that the reporting had lead to “concern in the market”, with investors staying cautious and withdrawing crypto from exchanges.

“FUD brought ‘stress test’, which in turn helps to build the credibility for exchanges that passes the test,” Zhao tweeted on Wednesday, using an acronym for “fear, uncertainty and doubt” often used in crypto in relation to news perceived as negative. REUTERS, BLOOMBERG