According to Changpeng Zhao, the founder of the largest cryptocurrency exchange, more than $1 billion was withdrawn from Binance in a single day, as investors across the industry continue to react to the collapse of rival FTX.
Zhao, better known as CZ, claims the withdrawals are just evidence of Binance’s solid foundation, calling it a “stress test” and reassures depositors that the exchange’s reserves are healthy. I let
“I saw some drawers today,” said Zhao tweeted on tuesday“We’ve seen this before. Some days we have net withdrawals. Some days we have net deposits. It’s business as usual for us.”
“In fact, I think it’s a good idea to do a ‘stress test drawer’ on a rotating basis for each CEX,” he added, adding an emoji of bicep curls. Zhao claimed Tuesday was not even among the top five days for net withdrawals.
In a statement from Binance, the company said: We passed this extreme stress test because we run a very simple business model of storing assets and generating revenue from trading fees. “
However, the outflow occurred after Binance was forced to suspend withdrawals of certain cryptocurrencies. According to Zhao, Binance could not make withdrawals until its U.S. banking partners started doing business.
USDC, a “stablecoin” widely recognized as one of the safest assets in the space, as it is issued by a US-based company that is compliant with financial regulators and pegged to the US dollar withdrawals have been suspended 8 or more times. time on Tuesday.
Question-and-answer session
What is a stablecoin?
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A stablecoin, as the name suggests, is a type of cryptocurrency that is supposed to have a stable value, such as US$1 per token. There are various ways they achieve it.The largest such as Tether and USD Coin are effectively banks. They hold large reserves in cash, liquid assets, and other investments, and their We use reserves to keep prices stable.
Others, known as “algorithmic stablecoins,” attempt to do the same, but without reserves. has been criticized for being backed by
Stablecoins are an important part of the cryptocurrency ecosystem. They provide a safer place for investors to store their capital without the hassle of fully cashing out, and they encourage investors to denominate their assets in traditional currencies rather than other highly volatile tokens. Make it possible.
The suspension raised concerns as some investors suggested customers’ assets may not be stored in the same form in which they were deposited.
In a memo to staff on Wednesday, Zhao reportedly admitted that the next few months would be “bumpy” but reportedly “will get through this difficult time – And we will be stronger by what we have experienced,” he reassured them.
Last week, the company released what it described as “audited evidence of its reserves.” This indicates that he holds assets worth 101% of all consumer deposits. But critics say the document says nothing about Binance’s debt, which includes potential loans to other companies, and that it’s not a true audit, as the audit firm is looking ahead. It was just an “agreed procedures” report that agreed not to. scope of the arrangement.
In a tweet, Zhao said the company plans to conduct an independent audit on debt, but said “debt is more difficult”, adding: Please ask around. “
The unease over Binance has come as Sam Bankman-Fried, the founder and CEO of FTX, once Binance’s main rival, said of his role in the catastrophic failure of his crypto exchange, the SEC, It happened when he was indicted by the CFTC, and the Department of Justice.
Bankman-Fried was denied bail in the Bahamas pending extradition to the United States.
John Ray III, the bankruptcy expert who succeeded Bankman-Fried as head of FTX’s liquidation process, said at a congressional hearing on Tuesday that he saw a “complete lack of record keeping” as he did. I have never,” he said. It was an exchange with “no internal controls at all”.
