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Binance CEO Changpeng Zhao (CZ) has attempted to allay fears of a FTX-style bank-run on Binance, after the exchange saw more than US$1 billion in net outflows on Tuesday, the exchange’s highest daily withdrawal since June.
According to CZ, who was speaking on a Twitter space AMA last night, there is “no amount of withdrawals” that would put Binance under pressure. CZ also argued that Sam Bankman-Fried’s arrest in the Bahamas was a contributing factor towards the surge of withdrawals on Binance.
“With SBF’s arrest, people generalise . . . People get hurt by one exchange, they lost money there, and they generalise that. That is just human behaviour,” he said.
CZ previously tweeted that the exchange can experiences net withdrawals or net deposits on “some days”, and it’s a “good idea” to “stress test withdrawals” on each CEX (centralised exchange) on a “rotating basis”.
Data from blockchain analytics Nansen shows that Binance recorded US$3.6 billion in net outflows in the past week. The exchange also temporarily halted USDC withdrawals on Tuesday, citing a “token swap” involving the stablecoin.
Investors are evidently growing skittish about Binance’s financials. On Wednesday, Binance released a five-page proof-of-reserves report from a partner at the South African affiliate of the global accounting firm Mazers, which did not show Binance’s total assets and liabilities – only the amount of bitcoin assets and bitcoin liabilities were revealed.
Douglas Carmichael, an accounting professor at Baruch College in New York and former chief auditor of the U.S. Public Company Accounting Oversight Board told the Wall Street Journal that investors should be not be satisfied with Binance’s report.
“I can’t imagine it answers all the questions an investor would have about the sufficiency of collateralization,” Mr. Carmichael said. “That’s the main thing it seems to speak to.”
Kraken CEO Jesse Powell also weighed in on the situation, stating that “the whole point of this is to understand whether an exchange has more crypto in its custody than it owes to clients.”
Binance is also under scrutiny after it was revealed that US regulators are investigating its handling of US money laundering and sanctions laws. CZ did not address these concerns during the Twitter AMA.
