World's biggest crypto exchange Binance pauses withdrawals of major token

Binance, the world's biggest crypto exchange, 'temporarily paused' withdrawals of the major stablecoin USDC on Tuesday after facing a huge run of client withdrawals.

Binance said at noon that withdrawals of USDC had resumed following a roughly eight hour pause, after CEO Changpeng Zhao tweeted: 'On USDC, we have seen an increase in withdrawals.' 

Binance saw withdrawals of $1.9 billion in the last 24 hours, blockchain data firm Nansen said, amid rising scrutiny of crypto exchanges following the arrest of Sam Bankman-Fried, the founder of Binance's now-bankrupt rival FTX. 

Prepared testimony that Bankman-Fried had planned to deliver to Congress on Tuesday took aim at Binance, accusing Zhao of orchestrating a 'sustained negative PR' campaign that contributed to his downfall.

'There is much more to say about Binance, its role in the cryptocurrency ecosystem, and its relationship with FTX, but this is neither the place nor the time for it,' Bankman-Fried's remarks added. 

Binance's chief executive Changpeng Zhao said that the crypto exchange had to pause withdrawals of USDC until banks in New York opened

Binance said in a separate tweet the halt was due to 'token swap' - where digital token holders exchange their crypto coins, typically over different blockchains

Bankman-Fried was arrested in the Bahamas on Monday at the request of US federal prosecutors, who charged him with a host of financial crimes, alleging he intentionally deceived customers and investors to enrich himself and others. 

Binance, whose dominance of crypto was cemented by the fall of FTX, last week tweeted a so-called proof-of-reserves report by audit firm Mazars. The report showed its holdings of bitcoin exceeded customer deposits on a single day in November.

The $1.9 billion of token withdrawals based on the ethereum blockchain mark the largest daily outflow over a 24-hour period since June 13, the Nansen data showed, and accounted for the majority of the funds being pulled in the last seven days.

'Binance's withdrawals are increasing due to the growing uncertainty about its reserves report,' a Nansen spokesperson said.

The withdrawals were 'business as usual,' Binance CEO Zhao insisted in a tweet. 'We saw some withdrawals today (net $1.14b ish). We have seen this before. Some days we have net withdrawals; some days we have net deposits.'

A Binance spokesperson earlier said it always had 'more than enough funds' to meet withdrawal requests. 'User assets at Binance are all backed 1:1 and Binance's capital structure is debt free,' the person said.

Asked whether Binance had enough USDC to meet USDC withdrawal requests, the person added it may need to move funds to online 'hot' digital wallets from offline wallets, convert stablecoins from one another or carry out network upgrades, sometimes causing delays.

Prepared testimony that Bankman-Fried had planned to deliver to Congress on Tuesday took aim at Binance, accusing Zhao of orchestrating a 'sustained negative PR' campaign

Some of Bankman-Fried's prepared remarks targeting Binance are seen above

Crypto news outlet CoinDesk reported earlier that Binance saw outflows of $902 million on Monday.

Binance is already under pressure from authorities. Splits between U.S. Department of Justice prosecutors are delaying the conclusion of a long-running criminal investigation focused on Binance's compliance with U.S. anti-money laundering laws and sanctions, Reuters reported on Monday.

Zhao said early Tuesday that swapping USDC Coin with two other crypto tokens - Paxos Standard and Binance USD - requires using traditional dollars at a bank in New York. 

'The banks are not open for another few hours. We expect the situation will be restored when the banks open.'

'The swaps are '1:1 conversions, no margin or leverage involved. We will also try to establish more fluid swap channels in the future,' he added.

Binance said in a separate tweet the halt was due to 'token swap' - where digital token holders exchange their crypto coins, typically over different blockchains.

Binance said in September it would automatically convert user balances and new deposits of USD Coin and other stablecoins Pax Dollar and True USD into its own stablecoin, Binance USD.