Binance has been the largest and most influential crypto platform since it burst on the scene in 2017. However, the FTX collapse, growing crypto skepticism and legal questions surrounding Binance have raised questions about the future of this platform.
Given the fluctuations in cryptocurrency and the domino-like fall of crypto companies experts are casting doubt on even the leaders on the crypto scene, as reported by Fortune. FTX seemed like a legitimate exchange until founder Sam Bankman-Fried was found to have been involved in the criminal shuffling of funds and dumping his own token to cash out ill-gotten gains.
With FTX Collapse, Questions Arise About Binance
The crypto sector is considered by some to be guilty by association, perhaps unfairly. However, there are some questions about Binance that may make its future seem less than absolutely certain.
Even before the FTX collapse, Binance was faced with investigations from regulators concerning money laundering and violations of sanctions. Worse yet. Around the time of the FTX collapse, customers withdrew billions from their accounts. This kind of sudden increase in withdrawals may be a sign of wrongdoing or association with crypto scams.
Although some experts wonder if Binance is in trouble, insolvency isn’t on the list of concerns. It’s clear from looking at blockchain transactions that the Binance is well-capitalized and holds bitcoin and liquid assets.
Insolvency was a factor in the FTX collapse, and it doesn’t seem that, if Binance heads south, its story will be similar to FTX. Although Binance chief Changpeng Zhao acknowledges that crypto is at an “historic moment” and there are headwinds, Binance’s finances seem secure.
Why Were There So Many Withdrawals from Binance?
However, the fact that Binance withdrawals in the aftermath of the FTX collapse amounted to $3.6 billion in one week with $2 billion in just one day. According to some reports, the total amount may be as high as $6 billion or $8 billion, and there is an indication that the Justice Department is investigating these sudden and large withdrawals.
Another worrying detail is that Binance halted withdrawals in US dollar backed coins USDC. The inability to fulfill these withdrawals in USDC has sparked concern that Binance has been backing loans in its own currency, BNB, similarly to the way FTX relied on its own token.’
Changpeng Zhao tried to reassure Binance users on social media and stated that withdrawals were not at their highest level after the FTX collapse. Zhao also said that deposits were increasing and headed back to normal levels.
Binance Fixes Its Image
Since it rose to prominence in 2017, Binance has cultivated a cowboy image. Crypto enthusiasts tend to enjoy freedom from regulations and maintain an independent spirit. However, this Wild Wild West nostalgia has a high price tag. The rising number of crypto scams and the collapse of crypto platforms has caused crypto users to clamor for regulations and oversight.
This requires an image change for Binance and Changpeng Zhao. Recently, the company has requested an audit to prove that customer accounts are backed 1:1. However, questions arose over the fact that Binance hired the South African branch of the global firm Mazars to perform the audit instead of the Big Four banks.
Some experts dismissed the audit as worthless and wonder what Binance has to hide. Concerning questions about the use of its own token BNB, in Binance’s defense it is the fifth largest cryptocurrency and not some worthless token. Nonetheless, Binance officials have insisted that they don’t back loans with BNB.
One thing is clear; even if Binance doesn’t have anything shady to hide, it will have to shed its maverick image and cooperate with regulators. This is true not only of Binance but other crypto exchanges who want to distinguish themselves from crypto scams, maintain their reputations and protect their customers.
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