Exchanges Under SEC Scrutiny for Securities Law Violations Experience Substantial User Withdrawals, Maintain Smooth Transaction Processing
SEC Lawsuits Trigger $4 Billion Deposit Exodus from Binance, Binance.US, and Coinbase, Blockchain Data Reveals. The three crypto exchange giants collectively experienced a net outflow of $3.1 billion via the Ethereum network and $864 million in bitcoin (BTC) from Monday to Thursday, as reported by blockchain analytics firms Nansen and Glassnode.
Net outflow indicates that withdrawals surpassed incoming deposits. However, the exchanges efficiently managed the withdrawal process in an organized manner throughout the week.
On Monday, the SEC initiated a lawsuit against Binance, its U.S.-based counterpart Binance.US, and CEO Changpeng “CZ” Zhao, accusing them of multiple violations of federal securities laws. Following that, on Tuesday, the agency filed a separate lawsuit against Coinbase, alleging that the platform offered unregistered securities to the public.
The cryptocurrency market experienced unease as a result of the SEC’s actions, particularly with regards to tokens identified as securities in the lawsuits. Tokens such as Binance’s BNB, Cardano’s ADA, and Polygon’s MATIC witnessed the most significant declines throughout the week.
The SEC’s efforts to freeze assets on Binance.US led to BTC and ETH trading at a notable premium compared to other platforms, as traders and market makers opted to withdraw from the platform.
In response to the regulatory crackdown, crypto traders swiftly withdrew their funds from the exchanges under SEC scrutiny. Binance, recognized as the largest cryptocurrency exchange globally in terms of trading volume, witnessed a substantial net outflow of $2 billion on the Ethereum blockchain within a span of four days, according to data from Nansen. This metric encompasses both ETH and all Ethereum-based tokens.
During the same timeframe, Glassnode data reveals that BTC withdrawals exceeded deposits by approximately $838 million (equivalent to 31,868 BTC). Wednesday witnessed the largest daily outflow of 13,953 BTC, marking the most substantial drawdown since last December.
This withdrawal surge occurred amidst shaken investor confidence, already weakened by the collapse of rival exchange FTX following a flawed reserve report. The combination of these events impacted trust in the exchange, led by Sam Bankman-Fried.
Although the outflows witnessed this week held substantial weight, they accounted for only around 5% of the total assets held on Binance, as indicated by the exchange’s crypto wallets. Coinbase experienced approximately $1 billion in net outflows via Ethereum from Monday to Thursday, according to Nansen.
Glassnode data revealed BTC outflows reaching $25 million. As for Binance.US, net outflows on Ethereum amounted to $75 million, as reported by Nansen. It’s worth noting that Glassnode does not track activities specifically on the Binance.US platform.
In response to the SEC’s “extremely aggressive and intimidating tactics,” the U.S.-based exchange announced on Friday that users are advised to withdraw USD funds promptly. The platform has temporarily halted USD deposits and intends to delist USD trading pairs in the near future. During this transitional period, the exchange will operate solely as a crypto-only platform.
Important: This article is intended solely for informational purposes. It should not be considered or relied upon as legal, tax, investment, financial, or any other form of advice.
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