Scrutiny of how crypto exchanges such as Binance and its now-bankrupt former rival FTX handle customer deposits is under close scrutiny from users and regulators.
FTX’s founder Sam Bankman-Fried was charged by the US Securities and Exchange Commission on Tuesday with defrauding investors.
Binance, whose dominance of crypto was cemented by the fall of FTX, last week tweeted a so-called proof-of-reserves report by audit firm Mazars. The report showed its holdings of bitcoin exceeded customer deposits on a single day in November.
The US$1.9 billion ethereum-based withdrawals mark the largest daily outflow over a 24-hour period since June 13, the Nansen data showed, and accounted for the majority of the funds being pulled in the last seven days.
“Binance’s withdrawals are increasing due to the growing uncertainty about its reserves report,” a Nansen spokesman said.
A spokesman for Binance 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 always have more than enough funds to fulfil withdrawal requests,” the spokesman added.
Asked whether Binance had enough USDC to meet USDC withdrawal requests, the spokesman said: “From time to time, we may need to top up hot wallets from our cold wallets, convert one stablecoin to another, or carry out routine network maintenances upgrades, all of which can cause occasional short delays. This is business as usual.”
Crypto news outlet CoinDesk reported earlier Binance saw outflows of US$902 million on Monday.
The exchange is already under pressure from authorities.
Splits between US justice department 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.
The report sparked a drop of almost 4% in Binance’s BNB token, traders told Reuters.
“Token swap”
The Nansen data came as Binance halted withdrawals of USDC, citing a “token swap” – where digital token holders exchange their crypto coins, typically over different blockchains.
“On USDC, we have seen an increase in withdrawals,” Binance’s chief executive Changpeng Zhao tweeted at around 8.20am.
Binance said in September it would automatically convert user balances and new deposits of USD Coin (USDC) and two other stablecoin into its own stablecoin, Binance USD.
Zhao said on Tuesday swapping USDC with two other tokens – Paxos Standard and Binance USD – requires using traditional dollars at a bank in New York.
“The banks are not open for another few hours. We expect the situation will be restored when the banks open.”