Cryptocurrency exchange Binance has seen a surge of withdrawals over the last 24 hours as investors appear to be spooked over recent news of regulatory action against Paxos and its stablecoin Binance USD (BUSD).
At the same time, the BUSD token has recorded significant redemptions, with 342 million BUSD burned over the last 24 hours according to Peckshield.
— PeckShieldAlert (@PeckShieldAlert) February 14, 2023
On Feb. 12, news broke that the United States Securities and Exchange Commission gave notice of potential enforcement action against Paxos. It alleged the stablecoin is an unregistered security, an assertion that Paxos denies.
Data compiled from the blockchain intelligence platform Nansen show that Binance recorded 24-hour multichain token net outflows of $788.5 million, caused by outflows of $2.7 billion exceeding inflows of around $1.97 billion.
According to Dune analytics data, it’s the largest 24-hour net outflow since Dec. 17, when Binance’s proof-of-reserve audits were removed from auditor Mazars’ website.
A spokesperson for Binance told CoinStreetDaily that “funds are SAFU” — backed by a Secure Asset Fund for Users — echoing what Binance chief Changpeng “CZ” Zhao said earlier on Feb. 13.
The spokesperson added that the exchange recently had a sell-off with “more than $1 billion” withdrawn in a 12-hour period, which it claims “was managed with ease.”
“We run a very simple business model — hold assets in custody and generate revenue from transaction fees,” Binance said, adding:
“We take our responsibility as a custodian seriously and maintain 1:1 backing for every user asset.”
Following the SEC’s action and a reported tip-off from USD Coin (USDC) issuer Circle, the New York Department of Financial Services (NYDFS) ordered Paxos to halt the issuance of BUSD on Feb. 13.
Related: Are stablecoins securities? Well, it’s not so simple, say lawyers
The outflows and token burns seemingly are a response to those events, with crypto users cashing out of the stablecoin over fears of further regulatory action.
Binance’s reserves harbor the largest amount of BUSD, holding $14.4 billion worth of the stablecoin, or around 90% of the $16.1 billion current market cap.
The crypto exchange also has around $60 billion worth of reserves, with 22% of that made up of BUSD.