Key Takeaways:
- Binance faced a withdrawal wave triggered by the Securities and Exchange Commission lawsuit.
- Several large investors chose to help the exchange with deposits.
- Will the strategy work, considering a potential “guilty” verdict?
YEREVAN (CoinChapter.com) – The Binance exchange has seen a net flow of -$600 million since the US Securities and Exchange Commission (SEC) filed a lawsuit against it on June 5. The withdrawals stood at $1.6 billion in the previous 24 hours, against $1 billion in deposits.
Binance faces withdrawals and… support
According to a Binance Smart Chain (BSC) news outlet, Binance stores over 41% of its nearly $48 billion reserves in stablecoins, preparing to offset the possible en-masse withdrawals. However, the current regulatory FUD triggered the largest “bank run” since the banking crisis in March.
Meanwhile, several large investors picked the FUD as a great time to enter the market. For example, blockchain investment firm FBG Capital deposited $44 million worth of USDT coins onto Binance to support the platform.
According to China-based crypto reporter Colin Wu, “NFT giant whale machibigbrother.eth stated that it has transferred all BAYC and MAYC to Binance to show support, worth nearly 2,900 ETH,” or $5.2 million.
Will the deposits help the exchange?
Notably, only Binance’s US division currently faces regulatory pressures, as opposed to the wider exchange. It means that FBG Capital’s “altruistic gesture” is not likely to help binance.US overcome those regulatory pressures.
However, even if the US division faces more troubles with lawmakers, the platform will likely remain popular for retail investors globally.
For comparison, Binance.US offers access to under 100 cryptocurrencies, while Binance offers pairs for more than 600 coins. The US division has approximately 670,000 users; the global exchange has 128 million. Thus, while the lawsuit will likely dampen the platform’s reputation, it might still largely retain its client base.
Also read: Are Bitcoin and Tether Biggest Beneficiaries of Binance-SEC FUD?
Mikkel Morch, Chairman and Non-Executive Director of crypto hedge fund ARK36, disagreed with the outlook. He told CoinChapter that the lawsuit could have severe consequences for Binance globally. The expert stated that the reputational damage alone could be significant if found guilty, leading to a “loss of trust from users and backers.”
Additionally, the potential legal consequences could include substantial fines, penalties, and even the suspension or cessation of operations in the US market. Binance may also face increased scrutiny from regulatory authorities in other jurisdictions, further impacting its operations and expansion plans.
commented Morch.
To further underscore the exchange’s impact, by the end of 2022, 92% of all spot Bitcoin trading occurred on Binance. Additionally, the platform hosted 55% of global crypto spot trading in Jan 2023.
