Binance, a major cryptocurrency exchange, has had staggering outflows of $2.2 billion since it was revealed that the Commodities Futures Trading Commission is suing it in the US (CFTC).
Customers of Binance have taken notice of the case, which claimed that Binance provides "unregistered securities" to retail users in the US. It was made public by the CFTC on Monday of this week.
The Wall Street Journal reported this week that up to $2.1 billion in net outflows have been observed on Ethereum alone over the last seven days, using data from Ethereum tracking platform Nansen.
The pattern is not exclusive to Ethereum; identical withdrawals have also occurred on other significant blockchains like Bitcoin, Tron, and Binance's BNB Chain.
The enormous sum is derived from Binance's total holdings in wallets that are known to the public, which at the time were valued at about $63.2 billion.
Nansen analyst Andrew Thurman commented on the withdrawals in the Wall Street Journal piece, describing the level as "heightened compared to regular activity" and adding that the activity increased following the CFTC announcement.
Thurman noted that, despite being more than usual, Binance has previously experienced larger withdrawal rates.
One of those instances occurred last month when New York regulators prohibited Paxos from continuing to issue the well-known Binance USD (BUSD) stablecoin.
On behalf of Binance, which operates globally under a variety of international regulatory frameworks, Paxos, a licensed trust business in New York, issues BUSD.
Following the prohibition, Binance CEO Changpeng Zhao stated that Paxos "will continue to service the product, and manage redemptions," while also acknowledging that customers will probably switch to other stablecoins "over time" as a result of the suspension of fresh BUSD minting.
The reinstatement of trading fees on Bitcoin trading pairs is another challenge that Binance has recently faced, and it may be the cause of recent withdrawals and overall reduced trading volumes on the platform.
Binance formerly provided fee-free trading on all bitcoin pairings as one of the very few in the market, which unsurprisingly caused a significant increase in trading volume.
The return of trading fees, however, may have caused some traders to start looking at other exchanges, notably algorithmic traders who are in charge of large volumes, which has increased the number of withdrawals.
John Quarnstrom, a portfolio manager at the cryptocurrency hedge fund Iceberg Capital, claimed fees are "very crucial" in the crypto market in a statement to the Wall Street Journal.
For the most part, he stated, "I'll decide to trade on an exchange first and foremost on its custodial aspect; the second is definitely the fees."
However, the exchange, as usual, indicated there is no reason to be concerned for people who are concerned about Binance's capacity to honor all the withdrawals.
According to a Binance representative, "[We] have] more than enough funds to fulfill withdrawal requests," the Wall Street Journal reported.