Binance withdrawals surge post SEC’s Paxos clampdown

• The SEC issued a wells notice to Paxos concerning the issuance of Binance USD (BUSD) stablecoin.
• Shortly after, the NYDFS ordered Paxos to stop issuing BUSD.
• While BUSD issuance stopped, Paxos is in charge of BUSD redemptions

Crypto exchange Binance has seen increased withdrawals over the past 24 hours as investors act on the recent allegation by the US SEC that Binance USD (BUSD) stablecoin is a security. Data obtained from the blockchain intelligence platform Nansen indicate that net outflows from the exchange had hit $788 million in the past 24 hours.

This is the largest net outflow from Binance since December 17 when the exchange’s proof of reserves audit was pulled down from the website of Mazars auditor.

Binance has however come out to array fears saying that funds are safe and that it can handle any amount of withdrawals. The exchange said:

“We run a very simple business model — hold assets in custody and generate revenue from transaction fees.”

It all started with the US SEC issuing a wells notice to Paxos Trust Company stating that it was violating investor protection laws by issuing an unregistered security, the BUSD. Following the SEC’s action, the New York Department of Financial Services (NYDFS) ordered Paxos to halt the issuance of BUSD and Paxos immediately obeyed the orders.

Increased BUSD redemptions

As investors rush to withdraw their funds from Binance, the BUSD token redemptions have also surged. Data from Peckshield shows that over 342 million BUSD tokens have been burned in the past 24 hours.

Investors seem to be cashing out of the BUSD stablecoin as fears of the SEC escalating the issue and filing a lawsuit as is the case with Ripple’s XRP token gain traction.