Binance’s CZ seeks to reassure investors after massive withdrawals amid FTX-induced market scepticism
- Zhao Changpeng said ‘things seem to have stabilised’ after reports questioning the company’s health spurred US$1.14 billion in withdrawals in 12 hours
- The world’s largest crypto exchange has been seeking to reassure users with proof of reserves after FTX’s collapse cast doubt on the entire industry
Binance chief executive Zhao Changpeng said “things seem to have stabilised” after customers pulled billions of dollars of funds from the exchange, in an attempt to allay persistent investor fears about the state of the cryptocurrency industry following the collapse of FTX.
On the same day, Binance suspended withdrawals of the stablecoin USDC, citing banking complexities. The move had prompted concerns among cryptocurrency investors about the health of Binance, before the exchange announced on Wednesday that withdrawals had resumed.
Binance said that US$1.14 billion in withdrawals in a 12-hour window was “handled with ease” because its business model is simply to “hold assets in custody and generate revenue from transaction fees”.
Since the November 11 bankruptcy of FTX, once seen as the biggest rival to Binance, the Cayman Islands-incorporated exchange has been seeking to prove it has all of its customers’ reserves. This would differentiate it from FTX, which got into trouble by lending customer funds to its sibling trading firm Alameda Research.
One move to reassure users was the publication this month of a “proof of reserves” report on its bitcoin (BTC) holdings conducted by third-party accounting firm Mazars, which showed that Binance had enough funds to cover all customer deposits on the day of its investigation. But the report drew scepticism because it was not a full financial audit and does not prove Binance’s financial health.
“Releasing the BTC custody reserves was just the first of many steps in the weeks ahead to provide more transparency and reassurance of our custody reserves,” Binance said in a statement. “In the wake of recent events, it’s imperative we develop new systems that allow users to access continuous on-chain verification of their assets in custody to regain user trust and once again prove that crypto is more secure and transparent than traditional finance.”
Shock from the meltdown of FTX, once the world’s second-largest cryptocurrency exchange, is still reverberating through the troubled industry worldwide, as investors brace for further fallout amid more regulatory action.