Binance, a cryptocurrency exchange, revealed on Tuesday that withdrawals of USDC have been halted during a “token swap” period.
Without initially passing via a FIAT buffer currency, the process entails exchanging one cryptocurrency for another.
The withdrawals might have been caused by erroneous worries about the exchange’s reserves.
The exchange has observed a spike in withdrawals of USDC, according to Binance CEO Changpeng Zhao, who suggested on Tuesday that this could be because investors are attempting to transfer their holdings to other exchanges.
However, Binance is in the process of converting more USDC to either PAX, another stablecoin, or BUSD, the company’s own token, but this process will take some time since a bank in New York that hasn’t yet been opened needs to be used for the re-routing process.
Any currency deposits are unaffected, and withdrawals for other stablecoins like BUSD and Tether function as expected without any issues or limitations.
Additionally, this is one of the first instances of “withdraw freeze” employed by Binance, a highly criticized tactic that signaled the demise of cryptocurrency lender Celsius Network.
The now-defunct cryptocurrency enterprise of Sam Bankman-Fried, who was detained on Tuesday in the Bahamas, attempted a similar tactic with FTX.
On its platform, Binance presently has assets valued at $60 billion, but between Monday and Tuesday, the business saw withdrawals totaling $1.6 billion, according to cryptocurrency analytics provider Nansen.
Withdrawals typically indicate a lack of confidence in cryptocurrencies, which is fair given that FTX failed owing to improper handling of customer funds.
An inquiry conducted by the US Department of Justice may also focus on Binance and result in legal action.
The temporary withdrawal freeze has not been addressed by Binance, and the company has not felt the need to reassure investors about it. Instead, it has said matter-of-factly that it was a standard procedure.