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Why Did Binance Secretly Offload USDC During Banking Crisis?

Last Updated August 9, 2023 5:58 PM
Omar Elorfaly
Last Updated August 9, 2023 5:58 PM
Key Takeaways
  • Binance proof-of-reserves report assures customers the company can cover any and all withdrawals
  • Binance sold the majority of its USDC deposits right after the Silvergate collapse

Binance recently released its proof-of-reserves  report, reassuring customers and stakeholders that it holds assets worth more than 100% of what customers are owed. However, one key point stood out. The world’s biggest exchange’s USDC reserves have shrunk significantly during March 2023.

Coincidentally, on March 8th, Silvergate Bank announced  it would be slowing down its operations and liquidating its assets. The announcement came after the crypto-friendly bank suffered $1 billion worth of losses in the last quarter of 2022 due to the collapse of crypto exchange FTX, one of Silvergate’s leading clients.

Binance Sells USDC For BTC & ETH

Binance’s PoR report shows that the company’s USDC balance decreased from $3.4 billion on March 1 to $23.9 million by May 1. 

According to Circle (the company behind the issuance of USDC Coin (USDC))’s S-4 registration statement , Binance started auto-converting its customers USDC to Binance USD (BUSD last year. 

“We estimate that up to $3.0 billion of the $8.3 billion decline in USDC in Circulation from June 30, 2022 to September 30, 2022 was driven by the auto conversion by Binance,” read the report.

Fast forward to March of this year, Twitter on-chain analyst Aleksandar Djakovic tweeted  his findings in Binance’s PoR. 

“Binance proof of reserves, the table shows how CZ was withdrawing dollars from US banks after the collapse of Silvergate and Signature banks, at the same time preventing the crypto from collapsing…”

CZ was already publicly skeptical of stablecoins as he once claimed that he saw Tether USD (USDT) as a “black box”.

CCN reached out to CZ for commentary but did not receive a reply at the time of publishing.

Binance Already In Hot Water

The move mentioned above may seem suspicious to some, but attempting to save the company’s financial reserves and their customers’ investments seems like a decent move. 

Unfortunately, BUSD hasn’t had the greatest luck either. Since the company was hit by a series of lawsuits filed by the US Securities and Exchange Commission, Binance’s native token BUSD has taken a serious downturn.

On top of that, Binance and its founder Changpeng Zhao are preparing for a potential federal lawsuit to be filed by the US Department of Justice following the SEC lawsuits.

As it stands, Binance is accused of thirteen crimes, including wash trading, commingling customer funds, and evading US regulators.

The company is facing even worse situations overseas as it experiences a mass European exit as German, French, British, Dutch, and Cyprus regulators refuse to issue trading licenses for the exchange.

Perhaps Binance will finally find a market that fits its operations and regulatory requirements in Asia and Latin America


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