SEC Crackdown Triggers $4B Deposit Outflow From Coinbase and Binance
The Securities and Exchange Commission (SEC) move to prefer 13 civil charges against Binance citing securities laws violation is causing deposit flight from the leading crypto exchange platforms.
The SEC’s submission on Monday, June 5, before the District of Columbia Court to charge Binance alongside its chief executive Changpeng Zhao is prompting users to withdraw their funds. The wave is causing huge outflow from the centralized exchanges led by Binance and Coinbase.
SEC’s Enforcement Actions Trigger Deposit Outflow
While the exchanges manage the withdrawal transactions accordingly, SEC lawsuits propel the outflow. A scrutiny of the exchange transactions volume reveals a $4 billion exodus of deposits from the leading crypto giants.
The data from blockchain analytic firm Nansen illustrated that Binance, Coinbase, and Binance.US had suffered a huge blow. Glassnode affirmed the outflow development by illustrating that the three suffered a $3.1 billion outflow through Ethereum and another $864 million exiting via Bitcoin. The analytics firms indicate that the withdrawals executed from Monday, June 5, till Thursday outpaced the deposits inflow.
SEC Onslaught to Binance and Coinbase
SEC’s recent onslaught against the digital industry is evident in the lawsuit filed against Binance, a US entity, and chief executive Zhao on Monday, June 5, citing a series of securities law violations. The Garry Gensler-led securities watchdog would hours later sue Coinbase on Tuesday. The latter suit alleged Coinbase offered unregistered securities to US residents.
The decision by the SEC to unveil the two enforcement actions against the duo unsettled the crypto market. In particular, the tokens referred to by SEC as securities within the submission plunged. Binance native token BNB led Cardano’s ADA and Matic by Polygon tumbled to exchange hands at a premium.
The downtrend portrayed by the cryptos arises from the SEC filing a motion to the District of Columbia Court seeking a freeze of digital assets and deposits held by Binance.US. The application prompted traders and market makers to exit the platform at a rate outpacing the exodus from other platforms.
The regulatory clampdown is directly to blame for triggering flight among the crypto traders to withdraw their funds en masse. Binance, the leading crypto exchange platform by trading volume, suffered a $2 billion net outflow within four days. Nansen data showed a huge outflow within the Ethereum blockchain as crypto traders rushed to save Ether (ETH) alongside the Ethereum-based tokens.
Deposit Outflow Matches Post-FTX Collapse Period
The data shared by Glassnode shows pacy Bitcoin withdrawals. The blockchain analytic firm discovered 31868 BTC withdrawals approximating $838 million withdrawn in four days. Wednesday would emerge the doomsday when a 13953 BTC net outflow was reported.
Glassnode observed the withdrawal as the largest daily outflow since December 2022, when the botched proof of reserve report eroded investors’ confidence. The firm notes a huge outflow by then was inevitable as the digital assets were treading on shaky ground following the sudden implosion of Sam Bankman-Fried-led FTX.
The outflows recorded this week are significant since the digital asset market began the April recovery following a prolonged crypto winter. Nonetheless, the outflows account for only 5% of the total assets held within Binance crypto wallets.
Scrutiny of Nansen data shows that the coin base suffered a $1 billion outflow through the Ethereum network. Glassnode shows that the BTC outflows were $25 million till Thursday.
The net outflows executed on Binance.US matched the pattern witnessed in Coinbase and the international platform. In particular, the net withdrawals executed via Ethereum are estimated at $75 million.
Binance.US Suspends Deposits and Announces Transition
Binance.US would, in its early Friday statement, inform users to withdraw USD deposits. The firm cited the extreme aggression and intimidation portrayed by the SEC. The firm confirmed suspending the US dollar deposits.
Binance.US warned its user community of its plans to delist the USD trading pairs. Finally, it informed users of temporarily transitioning to offer crypto-only exchange services.
Editorial credit: CryptoFX / Shutterstock.com
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