Binance Experiences Its Largest-Ever Outflow of Stablecoins as the Confidence Crisis Around the Exchange Worsens

Rohail Saleem
Binance Changpeng Zhao CZ

This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.

Some say it is a well-deserved recompense for triggering the downfall of FTX. Others contend that this is simply a manifestation of the contagion that has been slowly but irrevocably spreading through every possible crevice in the crypto sphere. Regardless of the raison d'être behind the latest bout of upheaval, it is an undeniable fact that Binance appears to be in a maelstrom.

Over the past 24 hours, nearly 40,000 Bitcoins have been removed from Binance.

Moreover, the exchange just recorded its largest-ever outflow of stablecoins in a 24-hour window, clocking in at over $2 billion.

Source: https://defillama.com/protocol/binance-cex

This sudden exodus of funds is now having a sizable impact on Binance's Total Value Locked (TVL) metric, which stood at over $67 billion on the 11th of November but has now decreased to just around $60 billion, corresponding to a decline of around $7 billion – most of which took place over the past 48 hours.

So, what went wrong? Firstly, Binance had tasked Mazars to perform an "audit" of its Bitcoin reserves. However, as per the auditor's press statement last week, the examination was quite narrow in its breadth, focusing only on "in-scope" assets and utilizing "agreed-upon procedures." In what proved to be a critical point of contention, the auditor noted:

"An agreed-upon procedures engagement is not an audit, review or other assurance engagement. An agreed-upon procedures engagement does not involve obtaining evidence for the purpose of the practitioner expressing an opinion or an assurance conclusion in any form."

Significantly, Binance's proof-of-reserves attestation glossed over the exchange's liabilities, with CZ laying down the proverbial gauntlet in the following words:

"Liabilities are harder; we don't owe loans to anyone; ask around."

Additionally, as we reported yesterday, Reuters sent another wave of jitters this week when it reported that the US Department of Justice (DoJ) is currently split on whether to formally level charges against Binance in a money laundering investigation that began in 2018, with some investigators now pushing for aggressively moving against key Binance executives, including its co-founder and CEO, Changpeng Zhao (CZ). Moreover, the firm's lawyers have met with DoJ officials over the past few months to discuss a possible plea deal or an out-of-court settlement.

Binance countered the report by denying any "insight" into the inner workings of the Department of Justice while highlighting the exchange's contribution to upholding the law.

Thereafter, Tron founder Justin Sun prompted another wave of anxiety when he withdrew over 33 million Binance USD (BUSD) and over 15 million Tether (USDT) from the exchange.

The halting of USD Coin (USDC) withdrawals on Binance further compounded the atmosphere of fear among investors.

Of course, as investors panicked, Sun quickly deposited $100 million back into Binance, with Changpeng Zhao later clarifying that Sun's withdrawal was "part of deploying BUSD on TRON."

Throughout this saga, Changpeng Zhao has continued to project confidence in Binance's financial viability by tweeting:

"I actually think it is a good idea to "stress test withdrawals" on each CEX on a rotating basis."

Source: https://coinmarketcap.com/currencies/bnb/

Despite CZ's protestations, the BNB coin remains under pressure as the entire crypto world continues to hold its collective breath on the question of Binance's solvency.

Do you think CZ is now facing karma for his hubris in the FTX saga? Let us know your thoughts in the comments section below.

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