Delphi Digital, a cryptocurrency data analytics company, claims that on December 13th and 14th, Binance had net outflows of approximately $5 billion.
The demise of FTX and the subsequent decrease in investor confidence in cryptocurrency exchanges may have caused large withdrawals.
Since the 10th of November, when the exchange began showing verification of reserves, this is the most significant 2-day outflow.
Concerns about Binance have been rising as U.S. Congress holds hearings over the FTX crash, leading to more users taking their funds out of the exchange.
Proof-of-reserves provided by Binance, which has been reviewed by the international accounting firm Mazars, showed that all customer assets are backed 1:1. However, Mazars suddenly removed their audit of Binance and apparently severed connections with the cryptocurrency business.
Mazars has suspended its activities connected to the issuance of ‘Proof of Reserves Reports’ for firms in the crypto industry owing to concerns over how the public understands these reports.
Binance’s CEO, Changpeng Zhao (CZ), has often said that the exchange’s assets are fully collateralised. The exchange platform allows users complete access to their funds at any time. If all users withdrew all of their funds, it doesn’t matter.
Banks operate with only a fraction of the funds they need, making it difficult for traditional financial people to wrap their heads around this concept. Furthermore, many conventional regulators believe that it is acceptable for crypto businesses to operate with only a fraction of the funds they need.
When there is a liquidity crisis in the crypto market, there is no central bank to print money and save the day for the banks. Therefore, crypto exchanges comply with the requirement to retain users’ funds on a 1:1 basis.