Binance, the world’s largest crypto exchange by volume, is being tested by a wave of large outflows as traders seek to withdraw their coins.
According to crypto intelligence firm Delphi Digital, Binance saw over $5 billion in net outflows on December 13-14.
Delphi Digital says the big drawdowns could come from the collapse of FTX and the ensuing decline in confidence levels in crypto exchanges.
“Binance saw over $5 billion in net outflows between December 13-14.
This is the largest 2-day outflow since the exchange began providing proof of reserves on Nov. 10.
As the US Congress holds hearings on the collapse of FTX, concerns about Binance have increased, leading to increased withdrawals.
Binance offered a Proof of Reserves report showing that all of its clients’ assets are secured 1-1, and had it reviewed by global audit firm Mazars. However, Mazars recently canceled its audit of Binance and reportedly cut ties with the crypto industry.
The firm said,
“Mazars has suspended its activity relating to the provision of “proof of reserves reports” for entities in the cryptocurrency industry due to concerns about how these reports are understood by the public.
Binance CEO Changpeng Zhao (CZ) maintained that all assets on the exchange are individually backed.
“People can withdraw 100% of the assets they have on Binance. We won’t have a problem on any given day. So 100% of the users withdraw 100% of the assets, it would be fine.
It’s very different for traditional financiers to understand because banks operate on fractional reserves, and traditional regulators, many of them may think it’s okay for crypto businesses to operate on fractional reserves. It’s not correct. In crypto, there is no central bank that prints money to bail out banks when there is a shortage of liquidity. So, crypto companies have to hold user assets one by one and that is what we do. It is very simple.”
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Feature image: Shutterstock/Andrea Danti/Fotomay/Natalia Siiatovskaia