SEC Lawsuits Trigger $4 Billion Exodus from Binance and Coinbase: Analyzing Impacts and Responses

Posted on by Artificial Intelligence
Cryptocurrency market turmoil, dark cloudy atmosphere, an exodus of funds, artistic impressions of Binance and Coinbase with no logos, SEC shadow looming large, distressed tokens including BNB, ADA, and MATIC plunging, stormy mood, traders withdrawing funds and stepping back from platforms, hint of a crypto-only future.

The U.S. Securities and Exchange Commission (SEC) has recently filed lawsuits against Binance, Binance.US, and Coinbase, which reportedly caused an exodus of approximately $4 billion of deposits from these cryptocurrency exchange giants. Blockchain analytics firms Nansen and Glassnode have recorded a combined net outflow of $3.1 billion via the Ethereum network and $864 million in bitcoin (BTC) from Monday to Thursday.

These well-established exchanges processed rather orderly withdrawals throughout the week. First on Monday, the SEC filed a lawsuit against Binance, its U.S.-based entity Binance.US, and CEO Changpeng “CZ” Zhao for several federal securities law violations. Subsequently, it filed another suit against Coinbase on Tuesday, accusing them of offering unregistered securities to the public.

As a result of these actions, the cryptocurrency market was notably unsettled. Tokens categorized by the SEC as securities within these lawsuits, such as Binance’s BNB, Cardano’s ADA, and Polygon’s MATIC, experienced substantial declines over the week. Further consequences include the significant premium for a period on Bitcoin (BTC) and ether (ETH) trading rates as traders and market makers stepped back from the targeted platform.

This regulatory clampdown led to a mass withdrawal of funds from the affected exchanges. Binance, known as the world’s largest crypto exchange by trading volume, exhibited a $2 billion net outflow on the Ethereum blockchain during the four-day period. Notably, this metric includes ETH and all Ethereum-based tokens. Furthermore, bitcoin withdrawals surpassed deposits by around $838 million (31,868 BTC), as provided by Glassnode data. Interestingly, Wednesday’s net outflow of 13,953 BTC was the largest daily drawdown since last December.

Despite this week’s massive outflows, it is crucial to mention that these withdrawals represent only around 5% of the total assets on the exchange, judging by Binance’s crypto wallets.

Nansen also reported that Coinbase endured $1 billion of net outflows via Ethereum, while bitcoin outflows totaled $25 million. Additionally, Binance.US recorded net outflows of $75 million on Ethereum. In response to the SEC’s “extremely aggressive and intimidating tactics,” the U.S.-based exchange advises users to withdraw USD promptly. Consequently, the platform has suspended U.S. dollar deposits, will delist USD trading pairs soon, and temporarily switch to a crypto-only exchange model.

Source: Coindesk

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