Binance paused withdrawals of USDC stablecoin on Tuesday (13 Dec) while it carried out a “token swap” and resumed withdrawals about 8 hours later.
On USDC, we have seen an increase in withdrawals. However, the channel to swap from PAX/BUSD to USDC requires going through a bank in NY in USD. The banks are not open for another few hours. We expect the situation will be restored when the banks open. 1/2
— CZ 🔶 Binance (@cz_binance) December 13, 2022
CZ explained that swapping USDC with Paxos Standard and Binance USD requires using traditional dollars at a bank in New York. He twitted that “the banks are not open for another few hours. We expect the situation will be restored when the banks open."
Indeed, the situation resolved promptly, but this is still a worrisome sign: USDC swaps always require a traditional bank, but usually Binance doesn’t have to halt withdrawals.
Different sources state different amount of withdrawals varying from 2 to 12 bln USD, but CZ is still playing it cool:
I was hanging out with @MatthewRoszak & @calvinelcheng the night when the heaviest withdrawals happened. They were like, "do you have to look at your phone?" I said, "nah, we have a team."
— CZ 🔶 Binance (@cz_binance) December 16, 2022
Obviously recent events like the FTX collapse have caused multiple troubles for crypto exchanges and sharply increased the amount of withdrawals as customers started transferring their funds to safer places. Binance considers this as “stress test withdrawals” and says that it’s safe and sound, but crashed exchanges used to say the same…
We saw some withdrawals today (net $1.14b ish). We have seen this before. Some days we have net withdrawals; some days we have net deposits. Business as usual for us.
— CZ 🔶 Binance (@cz_binance) December 13, 2022
I actually think it is a good idea to “stress test withdrawals” on each CEX on a rotating basis. 💪
1/2 https://t.co/uF9lLPDSyS
By the way, there is another consequence of FTX collapse that can influence Binance, its early investor. CNBC recently asked Zhao whether he will be able to return $2.1 billion payment from FTX, which Binance received when it exited its investment with FTX in 2019, as bankruptcy trustees will be looking to claw back any fraud transfers made by FTX to outside businesses or investors. CZ said that the company is financially okay and that he prefers to leave this matter to lawyers.
But is Binance as stable as CZ says? Mazars Group, which was earlier appointed as an official auditor for Binance’s proof-of-reserve, discontinued cryptocurrency exchanges audit and deleted the recent report that says that Binance controls around $9.7 billion of its users funds in bitcoin. Now we do not have any third-party confirmation of the exchange’s financial stability, but CZ isn’t discouraged, saying that blockchain doesn’t really need an audit:
Blockchains are public, permanent records. It's the most auditable ledger.
— CZ 🔶 Binance (@cz_binance) December 16, 2022
“FUD helps us grow, even though they are thoroughly annoying,” - says CZ. Well. Let’s hope that this is just FUD and nothing more serious.
