Last week, Binance halted withdrawals of major USDC stablecoin. Binance CEO Changpeng Zhao, best known as “CZ,” said that it saw an increase in USDC withdrawals.
Just as Blackrock (BX) limited redemptions of its REIT, BREIT to minimize a fire sale of assets, Binance wants to sustain stability. A day later, it resumed withdrawals.
Binance suffered around $3 billion in withdrawals in just 24 hours and $6 billion for the first half of last week. As a result, accounting firm Mazars halted its “proof of reserves” reporting.
Binance must soothe investor fears. They are increasingly nervous about crypto exchanges. In 2022, several crypto exchanges went bust, undermining the credibility of cryptocurrencies and related services.
Binance is among many firms that need to audit and report its holdings. The Bitcoin ETF, GBTC, did not reveal its Bitcoin holdings. This led to a discount of around 50% on Dec. 8, 2022.
The withdrawal resumption for USDC temporarily restores some user confidence. Still, customers will grow increasingly worried about the exchange’s liquidity. Binance has around $59 billion in assets. It has $36 billion held in the BNB and BUSD tokens that Binance created.
Expect Binance to phase out USDC, replacing it with BUSD, to increase a more stable crypto alternative for traders.
