As it performed a token swap, the world’s largest cryptocurrency exchange, Binance, momentarily blocked withdrawals of the stablecoin USDC. To do this, one must exclusively use cryptocurrencies rather than fiat money.
More people withdrew USDC, a cryptocurrency known as a stablecoin, because its value is pegged to the US dollar, according to Binance CEO Changpeng Zhao.
Crypto Exchange Binance Halts Stablecoin
With USDC, investors can purchase and sell cryptocurrencies quickly without converting their funds back into US dollars. Investors are removing USDC from Binance and relocating it to another exchange.
Binance’s stablecoin BUSD and PAX, according to Zhao, must be deposited into USDC through a New York bank. According to Zhao, Binance customers are swapping PAX and BUSD for USDC to withdraw their funds.
If banks do not reopen, Binance may be able to swiftly acquire more USDC through a token swap and resume customer withdrawals.
Consumers can still withdraw BUSD and tether, Zhao informed them. They should not worry about their deposits, he said.
Despite temporarily suspending USDC withdrawals, the world’s largest cryptocurrency exchange, Binance, processed $1.9 billion on Tuesday, according to blockchain data company Nansen.
If the data from Nansen is to be believed, the $1.9 billion in token withdrawals based on the Ethereum blockchain represented the highest daily outflow over 24 hours since June 13.
According to a representative from Nansen, Binance’s withdrawals are increasing due to the mounting ambiguity regarding its reserves report.
Executive Director of Binance tweeted, There was some cash outflows today about $1.14 billion net. This is a familiar pattern for us. It’s business as usual for us to make withdrawals some days and receive deposits on others, the bank said, justifying the withdrawals as normal variation in the bank’s daily activity.
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Binance has more than ample liquidity to fulfill withdrawal requests at all times, according to a previous statement from a company official.
According to the source, Binance has a debt-free capital structure and guarantees users’ assets at a 1:1 ratio.
When asked if the exchange had enough USDC to meet withdrawal requests, a spokesman said that delays could occur if funds had to be transferred from cold storage to hot wallets online, stablecoins had to be converted from one another, or the network had to be upgraded.
Investors were concerned about a sector-wide impact last month when the FTX exchange crashed. Sam Bankman-Fried, the ex-CEO of FTX, was arrested in the Bahamas on Monday evening after U.S. authorities filed criminal charges against him. Binance has been the source of increasing concern in recent weeks.
To convince users that their funds were secure, the exchange compiled the first proof-of-reserves report.
However, many familiar with the industry have more questions than answers. According to former SEC commissioner and Decrypt interviewee John Stark, the lack of a assurance conclusion and the failure to address internal financial controls were two major problems with Binance’s report.
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