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Binance, the world’s largest cryptocurrency exchange, said on Tuesday it was suspending withdrawals from the stablecoin USDC while performing a “token exchange”.
The move comes amid growing investor concerns about Binance’s stability following the collapse of rival exchange FTX, as well as a report of a potential criminal investigation by the US government.
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Binance said it has “temporarily suspended” USDC withdrawals while it conducts a “token swap.” This involves exchanging one cryptocurrency for another without the need for fiat currency.
Binance CEO Changpeng Zhao tweeted on Tuesday that the exchange is seeing increased withdrawals of USDC, a cryptocurrency known as a stablecoin because it is pegged one-to-one with the American Dollar.
USDC is used by investors to trade in and out of different cryptocurrencies without the need to transfer money into US dollars. If traders are withdrawing USDC from Binance, it could be to move it to another platform.
Zhao said that any USDC transfer from the stablecoin known as PAX, as well as Binance’s BUSD token, requires routing through a New York-based bank that isn’t open yet. Zhao’s suggestion is that users are looking to convert their PAX and BUSD to USDC to withdraw their funds from Binance.
A token swap could be a way for Binance to quickly get more USDC while banks are closed to resume customer withdrawals.
Zhao said users can still withdraw other stablecoins including BUSD and tether. Deposits are not affected, she said.
Binance token called BNB it traded about 5% lower on Tuesday morning, according to data from CoinGecko.
It’s usually not good news when a cryptocurrency company has to suspend withdrawals. In the summer, cryptocurrency firms, including lender Celsius, had to suspend withdrawals before filing for bankruptcy. There is no indication of any such issues for Binance.
In the past 24 hours, Binance has seen $1.6 billion in outflows from its platform, according to a tweet by cryptocurrency data firm Nansen posted early Tuesday. Binance has more than $60 billion in assets on its platform, Nansen said.
Nervous investors
The collapse of FTX and the arrest of its former CEO Sam Bankman-Fried has put cryptocurrency investors on edge with fears of further contagion across the industry.
Binance has been in the spotlight since its decision to sell its stake in FTX’s self-issued FTT digital tokens, which preceded the bankruptcy of the rival exchange.
Investors have been calling for more transparency from Binance’s business. Last month, the company released a proof of reserve claiming it has a reserve ratio of 101%. This means that it has sufficient assets to cover customer deposits.
But critics said the proof of reserves didn’t go far enough to give any guarantees on Binance’s guarantees. Mazars, the accounting firm used by Binance for its proof of reserves, said in its five-page report that the company “does not express an opinion or conclusion for guarantees.”
Investors are also keeping tabs on a Reuters report that prosecutors at the US Department of Justice are delaying the conclusion of a criminal investigation into Binance. Reuters, citing four people familiar with the matter, reported that the investigation centers on Binance’s compliance with anti-money laundering laws. Binance responded by saying, “Reuters got it wrong again.”
“We have no insight into the inner workings of the US Department of Justice, nor would it be appropriate for us to comment if we did,” the company said in a tweet on Monday.
