Crypto analytics firm Nansen has reported that investors have withdrawn more than $2 billion from Binance following enforcement action by US regulators. Andrew Thurman, an analyst at Nansen, stated that "the pace of withdrawals is heightened compared to normal activity and did pick up after the announcement [from the US regulator]."
On Monday, the US Commodity Futures Trading Commission (CFTC) filed enforcement action against Binance and its founder, Changpeng 'CZ' Zhao. The CFTC has been investigating Binance since 2021, accusing the company of failing to register properly with the derivatives regulator. The CFTC considers bitcoin (BTC-USD), ethereum (ETH-USD), and litecoin (LTC-USD) as commodities and alleges that Binance conducted unregistered derivative trading with these digital assets.
The US regulator has also accused Binance founder Changpeng "CZ" Zhao of encouraging Americans to "evade compliance controls." In response, Zhao refuted the CFTC's allegations on Tuesday, claiming that the crypto exchange "never engages in trading for profit or 'manipulating' the market in any situation."
Nevertheless, the withdrawals from Binance have continued to escalate, with over $2 billion leaving the exchange since the beginning of the week. Most of these withdrawals occurred on the Ethereum blockchain. Nansen's data revealed that the rate of withdrawals from Binance surged before and after the CFTC announcement. In the 12 hours prior to the enforcement action announcement, more than $850 million worth of cryptocurrencies were removed from the exchange, according to Thanefield Capital. Within an hour of the announcement, an additional $240 million was withdrawn.
At present, Binance's publicly disclosed wallets hold over $63 billion in cryptocurrency assets, including more than $2 billion in Tether (USDT-USD). Under the guidance of founder Changpeng "CZ" Zhao, Binance has risen to become the world's largest crypto exchange, dominating various sub-sectors such as cryptocurrency trading, digital art, and venture capital.
Binance's influence has expanded since the elimination of one of its main competitors, Sam Bankman-Fried's FTX exchange, which collapsed in November 2022. This month, Binance accounted for approximately 70% of all trading volumes in the spot market, compared to just 6% on Coinbase (COIN).
Digital asset data provider Kaiko asserts that Binance's market dominance in the crypto industry surpasses that of Apple (AAPL) or Samsung (005930.KS) in the smartphone industry. As investors continue to withdraw funds, the impact of the CFTC's enforcement action on Binance's market position remains to be seen.
