Regulators’ attack cost Binance exchange almost $1 billion

Against the background of sharply increased regulatory pressure, market participants massively withdrew assets worth almost $1 billion from the Binance exchange in a few days.

In the last few days, the world’s largest crypto exchange has been experiencing a record amount of outflow of funds. Binance users are massively withdrawing money from the site amid the activity of US regulators who have taken up the stablecoin segment.

Binance has become a victim of regulators

Recall that February 13 turned out to be an unlucky day for Paxos Trust Company, the issuer of stablecoins behind Binance USD (BUSD) and Paxos Dollar (USDP). The US Securities and Exchange Commission (SEC) accused Paxos of violating the law on investor protection by issuing stablecoins of the Binance — Binance USD crypto exchange, which the regulator considered an unregistered security.

Next, it became known that against this background, the financial regulator of New York (NYDFS) ordered Paxos to break off relations with Binance and stop issuing BUSD.

Against this background, the exchange’s native token, Binance Coin (BNB), was also under strong pressure. It sank below the $300 mark.

According to Dune Analytics, the net outflow of funds from Binance for February 13 amounted to $916 million. This is the maximum intraday outflow from the exchange since November 24.

The main part of this outflow was clearly made up of investors who hurried to withdraw their money from a possible blow against the background of clouds gathering over BUSD. The stablecoin itself, which came under the sights of regulators, temporarily lost its peg to the US dollar, and its market capitalization has currently sunk below $ 15.7 billion.

The Paxos team has already responded to the SEC’s notification of the threat of prosecution. In a published statement, the company expressed “categorical disagreement” with the statement that BUSD is a security.

Many members of the crypto community have also stated that they disagree with the SEC. The head of Binance, Changpeng Zhao, warned on Twitter that although he is “not an expert on US laws,” he believes that if the court recognizes BUSD as a security, it will have serious consequences for the entire crypto industry.

Indeed, now the exchange is one of the main heavyweights in the crypto space. Such an attitude towards it or its stablecoin can have a domino effect on the entire industry.

Zhao also assured clients that all their assets are safe, and added that in light of recent events and “regulatory uncertainty in some markets,” Binance will conduct a “reassessment of its other projects in these jurisdictions” to protect its clients from unnecessary risks.

It also became known that the exchange hired the former operating director of Gemini Trust, Noah Perlman, as head of the compliance control department.