Binance Suspends USDC Withdrawals Amid Massive Outflows

In a statement released Tuesday, 13 December, cryptocurrency exchange Binance said that it is pausing USD Coin (USDC) withdrawals due to token swap operations.

"USDT & BUSD withdrawals are available and unaffected. USDC withdrawals will reopen once the token swap is completed," the exchange wrote on Twitter.

Binance CEO Changpeng, "CZ" Zhao, acknowledged that the exchange saw increased withdrawals of USDC. CZ claims that there's no risk to user funds. Rather, Binance elected to pause withdrawals because the token swaps involved going through a traditional bank in NYC.

"The banks are not open for another few hours. We expect the situation will be restored when the banks open," he said.

CZ further insisted that there would be no leverage or margin trading involved in these swaps. "These are 1:1 conversions, no margin or leverage involved. We will also try to establish more fluid swap channels in the future. In the meantime, feel free to withdraw any other stablecoin, BUSD, USDT, etc," CZ said.

The swap operations seem connected with Binance's earlier decision to cease support for USDC.

Over the last 24 hours, Binance has seen a net outflow of $1.6 billion. In the last week, that figure was almost $2 billion. The figures account only for tokens on the Ethereum blockchain, and total withdrawals could be larger.

According to blockchain analytics firm Nansen, Binance has $62 billion worth of crypto in its publicly provided wallet addresses. It's important to note that almost 40% of its reserves are in its own tokens, BUSD and BNB.

Despite providing its public wallet addresses, many investors are not convinced that Binance provides enough transparency. In particular, the wallet balance doesn't reveal anything about the exchange's liabilities.

To quell some concerns, Binance requested a "proof of reserve" report from an auditing firm. The report showed that the company had a reserve backing of 101%, enough to pay all depositors.

However, critics remained unconvinced. For one, the report only looked at a snapshot of Binance's reserves on Nov. 22, 2022. Mazers, the auditing firm that wrote the report, noted that they "did not express an opinion or an assurance conclusion" about Binance's reserves.