Deposits Are Returning To Binance But Road Ahead Is Bumpy, Says CEO

Binance CEO Changpeng Zhao said on Wednesday that the situation at his cryptocurrency exchange has “stabilized,” attempting to assuage investors’ concerns after the company was forced to halt withdrawals of a stablecoin.

Zhao stated that approximately $1.14 billion in net withdrawals occurred on Tuesday, but added that this was “not the highest withdrawals we processed, not even top [five].” Deposits are returning to Binance, according to the CEO.

His remarks come after Binance temporarily halted USDC stablecoin withdrawals on Tuesday while it performed a “token swap.” Binance has seen an increase in USDC withdrawals, according to Zhao.

According to Zhao, the halt in withdrawals was caused by the fact that some currency swaps had to be routed through an unspecified bank in New York that was closed. After about eight hours of downtime, Binance resumed withdrawals.

The incident alarmed investors, especially after the collapse of crypto exchange FTX and subsequent arrest of its founder, Sam Bankman-Fried, on federal criminal charges.

According to Nansen, a blockchain analytics firm, there have been more than $3 billion in net withdrawals from Binance in the last seven days. However, Nansen CEO Alex Svanevik stated that the situation is different from FTX, which saw withdrawals to the “tens of billions of dollars.”

“I would say that you’re definitely seeing larger than normal withdrawals from Binance. And so it is definitely worth keeping an eye on but as far as I can tell at this point in time, this is very different from the FTX situation,” Svanevik told CNBC’s “Capital Connection” on Wednesday.

Svanevik pointed out that Binance has around $60 billion in assets on its exchange, of which withdrawals account for a small portion.

Binance’s Zhao has also attempted to project a sense of strength within the company.

“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,” Zhao wrote in an internal memo, seen by Bloomberg.

Investors have demanded greater transparency from Binance’s operations. The company issued a proof of reserve last month, claiming a reserve ratio of 101%. That is, it has sufficient assets to cover customer deposits.

However, critics claim that the proof of reserves does not go far enough to provide assurances about Binance’s collateral. Binance’s auditing firm, Mazars, stated in its five-page November report that the company “does not express an opinion or an assurance conclusion.”

Zhao stated during a Twitter chat on Wednesday that it holds one-to-one user asset reserves. He also stated that the company will issue another batch of proof of reserves in the “next couple [of] weeks.”

(Adapted from Reuters.com)

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