In light of recent regulatory issues faced by Binance and its sister company Binance US, investors have been withdrawing from the platform in droves. Data provided by crypto data firm Kaiko reveals a staggering 80% plunge in market depth on the US sister exchange since the US Securities and Exchange Commission (SEC) filed a lawsuit last week. The suit implicates both Binance and Binance US, accusing Binance CEO Changpeng Zhao of commingling customer funds through a supposed “web of deceit.”
According to Kaiko analyst Dessislava Aubert, market makers have fled Binance US en masse in the past week, resulting in an almost 80% reduction in the platform’s liquidity. It is worth noting that the decline in liquidity on Coinbase and Binance has been more moderate compared to Binance US. Binance US is said to be an independent entity from Binance but shares the same logo. It serves as a cryptocurrency exchange for Americans, while Binance holds the title of the world’s largest cryptocurrency exchange.
However, the SEC’s lawsuit against Binance casts doubt over the claim that Binance US is a separate company. When it comes to America’s largest digital asset exchange, Coinbase, the SEC also filed a lawsuit against it the day after it sued Binance, but the allegations appear to be less severe.
In response to the SEC’s lawsuit, Binance US suspended deposits in US dollars. Data from Kaiko highlights that the recent US banking crisis and regulatory crackdown have severely impacted fiat volume, with US-denominated volume being hit the hardest.
This year has presented numerous challenges for the cryptocurrency sector. Notably, after the collapse of the massive digital asset exchange FTX in November, US regulators have enacted stringent crackdowns against the industry. This has led to several companies shutting down their operations.
A primary focus for the SEC has been to target crypto firms seemingly selling unregistered securities. However, the increased pressure on the industry has not halted the rise of Bitcoin, the largest cryptocurrency by market cap. Starting at $16,615 in January, Bitcoin has surged significantly, reaching a current value of $25,814 per coin.
In conclusion, regulatory scrutiny and ongoing conflicts with US authorities have sparked a mass exodus of investors from Binance’s US platform, leading to a sharp decline in liquidity. This situation highlights the importance of regulatory compliance in the cryptocurrency sector, a factor that will likely continue to dominate discussions around its growth and development.
Source: Decrypt
