Latest Crypto Panic Sees $1.9 Billion Withdrawn in One Day, Sparking Calls to Protect Investors
Cryptocurrency exchange Binance saw investors pull out $1.9 billion (£1.62bn) of their cash in 24 hours, as the fallout from FTX exchange collapse throws a veil over the world of crypto.
The charges against former FTX chief Sam Bankman-Fried and the prospect of further regulation of the industry seems to have spooked mainstream investors, who are pulling their money from exchanges unrelated to FTX.
Competitor Binance, led by Changpeng “CZ” Zhao, announced on Twitter that it had “temporarily suspended” withdrawals from its stablecoin USDC in order to shore up the market.
Withdrawal attempts from crypto exchange Binance were the highest since June, according to blockchain data firm Nansen.
“Binance withdrawals are increasing due to growing uncertainty regarding its reserves report,” a spokesperson for Nansen said.
The withdrawals were also fueled by panic across the industry following the arrest of FTX co-founder Mr. Bankman-Fried for alleged “financial crimes” in the United States and the Bahamas, and grim headlines about his lifestyle and allegations of wrongdoing. However, no allegations have been made against Binance or anyone associated with it.
Until he was criticized last month by Mr. Zhao, Mr. Bankman-Fried had been seen by many in the industry as the conscience of crypto, liaising with regulators on how to steer it away from its “Wild West” reputation.
That the crypto industry’s supposed white knight got caught up in such dangerous allegations could spell the end of crypto’s future reputation among grassroots investors.
Binance played down the impact of broader skepticism about its stability, saying the company was strengthened. “We still have enough funds to meet withdrawal requests,” a spokesperson said.
Whether the concern over Binance is due to the arrest of Mr. Bankman-Fried is disputed by industry players. “I don’t think SBF’s arrest has any impact on Binance,” said crypto researcher Patrick McCorry. “It seems the audit report they put out has backfired and scared off investors, so people are withdrawing now because it’s safer to do so – and then re-file later – rather than just keep the funds on the platform.”
McCorry also thinks fears that Binance is on the verge of collapse are overblown. “The long-term problem is really just the regulatory pressure they might be under, especially since entities like the SEC are quite hostile,” he said. This pressure has likely increased given the scrutiny that Mr. Bankman-Fried has subjected to the entire crypto industry.
It now seems likely that regulators will continue to crack down on the crypto sector, worrying about the impact it is having on ordinary people’s finances as they continue to pour their money into an industry filled with failures. business and bankruptcies.
Regulators are particularly concerned about the impact on poorer ethnic minorities. Asian, Black and Hispanic Americans More Likely Than White Adults to Say They’ve Invested in Cryptocurrency, Study Finds by the Pew Research Center.
Jerome Powell, Chairman of the US Federal Reserve, said in April that more regulation of cryptocurrencies was needed to maintain customer confidence.
Yet proponents of the crypto experiment believe this exaggerates the problem. Instead, McCorry believes that the current issues facing Binance reflect a broader concern about the cryptocurrency market, just as there are in many traded sectors.
“There’s usually a lot of fear in the market right now,” he said. “That’s because we have to rely on the legacy Web2 architecture to protect billions of dollars worth of crypto. The best these companies can offer is assurances from external auditors that really seem to be backfiring in practice, because it raises awareness of the problem.”
For crypto devotees like Mr. McCorry, the issues facing the industry right now are little more than hurdles — and motivating hurdles that push them to make bigger, deeper changes to how the financial industry works.
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