Following the news of the U.S. Commodity Futures Trading Commission’s (CFTC) civil complaint against Binance and CEO Changpeng Zhao (CZ) for alleged violations of trading and derivatives rules, the exchange experienced a significant number of withdrawals. On March 27, 2023, more than $400 million in Ethereum-based funds were withdrawn in a 24-hour period, according to data from Nansen and Dune Analytics. Additionally, Coinglass metrics show that 3,655 bitcoins, worth over $99 million, were withdrawn from the exchange over the past day. Binance also saw a significant outflow of funds prior to the CFTC’s indictment according to analytics from “An Ape’s Prologue,” which noted large stablecoin withdrawals across centralized exchanges, totaling nearly $1.5 billion in just 12 hours, and an $850 million outflow from Binance itself.
As of writing, Nansen’s proof-of-reserves portal shows Binance holding $63.36 billion worth of cryptocurrency assets. Binance also holds one of the largest caches of bitcoin, with 248,597 bitcoin stored in its cold wallet, the single largest address today. However, according to Coinglass, Binance’s BTC balance indicates that the exchange has shed 3,655 bitcoin worth close to $100 million over the last day. While Binance saw the most bitcoin outflow over the last 24 hours, Coinglass records indicate that 1,025 bitcoin was also withdrawn from Coinbase.
In response to the CFTC’s lawsuit, Binance has vowed to fight what it calls “baseless allegations,” stating that it always aims to comply with regulatory requirements and takes its obligations as a financial institution seriously. However, the exchange has faced regulatory scrutiny from various jurisdictions in recent years, prompting it to restrict its services in certain regions like the United States and the United Kingdom. Additionally, Binance’s parent company, Binance Holdings Limited, is under investigation by the U.S. Justice Department and the Internal Revenue Service (IRS) for possible money laundering and tax evasion.
Despite the CFTC’s lawsuit and the subsequent withdrawals from Binance, the wider cryptocurrency market remained relatively stable, with bitcoin holding steady above $58,000 as of March 28, 2023. However, the ongoing scrutiny of Binance and other major cryptocurrency exchanges could lead to increased regulatory pressure on the industry as a whole. This could result in more withdrawals from exchanges and increased volatility in the short term, but some experts believe that greater regulatory clarity could ultimately benefit the market by attracting more institutional investors and establishing greater trust among retail investors.
