Traders are withdrawing billions of dollars from Binance as problems continue to plague the world’s largest cryptocurrency exchange.
The Commodity Futures Trading Commission sued Binance on Monday, alleging that it operates illegally in the United States and violates rules designed to prevent illicit financial activity. Last week, Binance announced it would charge fees again for spot Bitcoin trading after dropping them to zero last summer. We also had to suspend spot trading for hours while we fixed the software error.
As of Monday night, Binance experienced a net outflow of $2.1 billion in seven days on the Ethereum blockchain, according to crypto data provider Nansen. It has $63.2 billion, Nansen data shows.
“The pace of withdrawals has been higher than normal activity and has picked up since the CFTC announcement,” Nansen analyst Andrew Thurman said on Monday.
Still, Binance has seen larger outflows in the past from regulatory moves. Thurman said the outflow became more pronounced in February after New York regulators announced they would ban new issuance of the Binance-branded stablecoin BUSD, peaking at $1 billion every 24 hours. Told. The token, the third largest stablecoin in the world, has more than halved its market value this year.
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Binance’s decision to revive trading fees likely contributed to its spot market share decline, analysts say.
The exchange’s spot market share fell from 57% at the beginning of the month to a low 30% on March 24, according to CryptoCompare. According to Kaikou, his provider of digital asset data, the majority of trading volume on Binance was zero fees until they added fees.
“Commissions are very important,” said John Quantstrom, portfolio manager at crypto hedge fund Iceberg Capital. The second is certainly the fees.”
Binance maintains a 66% market share in the crypto derivatives market as of March 24, according to CryptoCompare.
A Binance spokesperson did not immediately respond to a request for comment.
In another sign of trouble for the cryptocurrency giant, a federal judge on Tuesday ruled that Binance’s American affiliate, Binance.US, has moved from bankruptcy to Voyager Digital’s customer accounts while federal officials challenge the transaction. blocked the purchase of
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Investors and analysts are watching for further regulatory action against Binance in the US and other jurisdictions in the coming months. The company’s chief strategy officer told The Wall Street Journal last month that Binance will pay the fine to settle existing U.S. regulatory and law enforcement investigations into its business.
Chris Perkins, president of cryptocurrency venture firm CoinFund and a member of the CFTC’s Global Markets Advisory Committee, said, “The US institutions are very strong.”
CFTC Chairman Rostin Behnam said Tuesday that Binance’s ongoing efforts to circumvent US rules and force Americans to use its offshore cryptocurrency exchange are part of an “ongoing scam”. said.
Speaking on CNBC, Behnam said Binance deliberately circumvented CFTC registration requirements and instructed customers how to connect to the exchange without revealing its location in the United States. said the regulator.
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“This is an ongoing fraud that dates back to 2019 and is an ongoing violation of the Commodity Exchange Act,” Behnham said on CNBC’s “Squawk Box.” “It seemed to me that this was a very clear case of avoidance and that we should actively intervene and do it as soon as possible.”
A spokesman for the CFTC said Mr Beanham was “speaking generally to a more general audience about what the Binance lawsuit is, essentially fraudulent activity.” However, the agency did not prosecute Binance or its executives for fraud, as defined by the law enforced by the CFTC.
Binance said it has made efforts to legally operate in the United States, including establishing an affiliate, Binance.US, which offers a streamlined menu of cryptocurrency products for American users.
Binance founder Changpeng Zhao said the CFTC allegations were “unexpected and disappointing,” adding that Binance had “worked with the CFTC for over two years.” .
Some investors have pulled out of Binance for fear of bank runs like the one that bankrupted crypto exchange FTX and other lending platforms last year.
François Cluzeau, head of trading at crypto market-making firm Flowdesk, said the company has reduced its exposure to Binance since Friday.
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“We always try to keep a minimum amount of funds on the exchange, but now we are cutting even more,” Cluzeau said. “We had a terrible year on FTX and no one wants to take that risk.”