TL;DR Breakdown
- The SEC lawsuits against Binance and Coinbase have led to more than $4 billion in outflow.
- Exchanges continue to process withdrawals despite looming issues.
U.S. Securities and Exchange Commission (SEC) lawsuits against cryptocurrency exchanges Binance, Binance.US, and Coinbase have triggered a significant outflow of approximately $4 billion in deposits, as reported by blockchain data.
SEC lawsuit causes $4 billion in outflows
Data from blockchain analytics firms Nansen and Glassnode reveal that between Monday and Thursday, the three exchanges collectively experienced a net outflow of $3.1 billion through the Ethereum network, along with an additional $864 million in bitcoin (BTC). Net outflow indicates that the withdrawals surpassed incoming deposits.
Despite the regulatory challenges, the withdrawals were processed in an orderly manner by the exchanges throughout the week. The SEC initially filed a lawsuit on Monday against Binance, its U.S.-based counterpart Binance.US, and CEO Changpeng “CZ” Zhao, citing violations of federal securities laws. Subsequently, on Tuesday, the agency sued Coinbase for allegedly offering unregistered securities to the public.
These actions created a sense of unease in the cryptocurrency market, leading to a significant decline in the value of tokens that the SEC identified as securities in the lawsuits. Notably, Binance’s BNB, Cardano’s ADA, and Polygon’s MATIC experienced the most pronounced drops during the week. As the SEC sought to freeze assets on Binance.US, BTC, and ETH traded at a notable premium on the platform compared to others, resulting in traders and market makers retreating from the exchange.
Affected exchanges continue to process withdrawals despite looming issues
Concerned by the regulatory crackdown, crypto traders swiftly withdrew their funds from the targeted exchanges. Nansen data indicates that Binance, the world’s largest crypto exchange by trading volume, witnessed a net outflow of $2 billion on the Ethereum blockchain within four days. This figure includes ETH and all Ethereum-based tokens. Glassnode’s data reveals that BTC withdrawals surpassed deposits by approximately $838 million (equivalent to 31,868 BTC) during the same period.
On Wednesday, the exchange experienced a significant net outflow of 13,953 BTC, marking the largest daily drawdown since December, when investor confidence was shaken by a flawed reserve report and the collapse of a rival exchange, FTX.
While the outflows observed this week were substantial, they represent only around 5% of all assets held on the Binance exchange, according to Binance’s crypto wallets. Coinbase, on the other hand, endured a net outflow of $1 billion via the Ethereum network from Monday to Thursday, as reported by Nansen. Glassnode’s data shows that BTC outflows from Coinbase totaled $25 million.
Meanwhile, Binance.US witnessed net outflows of $75 million on the Ethereum network, according to Nansen. Glassnode does not track this particular platform. In response to the SEC’s “extremely aggressive and intimidating tactics,” Coinbase advised its users to withdraw USD deposits as soon as possible. The exchange temporarily suspended U.S. dollar deposits and will soon delist USD trading pairs, transitioning to a crypto-only exchange.
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