Changpeng Zhao, CEO of Binance. Photo: Ben McShane/Sportsfile/Getty
According to crypto analytics firm Nansen, investors pulled $2bn (£1.62bn) out of Binance last week.
“The pace of withdrawals has increased compared to normal activity and has picked up following the announcement [from the US regulator]Andrew Thurman, an analyst at Nansen, claimed.
On Monday, the US Commodity Futures Trading Commission (CTFC) filed enforcement action against Binance and its founder Changpeng ‘CZ’ Zhao.
According to the CFTC, which has been investigating Binance’s business since 2021, the company failed to meet its regulatory obligations by not properly registering with the derivatives regulator.
The CFTC classified Bitcoin (BTC-USD), Ethereum (ETH-USD) and Litecoin (LTC-USD) as commodities and accused Binance of conducting unregistered derivative trading with these digital assets.
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Binance founder Changpeng “CZ” Zhao has also been accused by US regulators of encouraging Americans to “evade compliance controls”.
On Tuesday, Zhao dismissed the CFTC’s allegations, saying that the crypto exchange “does not engage in trading for profit or ‘manipulate’ the market in any way.”
But the outflow from Binance has only accelerated, and more than $2 billion has left the exchange since the start of the week, with most withdrawals being done on the Ethereum blockchain.
Data from Nansen showed that the withdrawal rate from Binance increased during and after the CFTC announcement.
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According to Thanefield Capital, in the 12 hours following the announcement of enforcement action from the CFTC, Binance removed $850m worth of cryptocurrencies from the exchange.
And, just an hour after the announcement, an additional $240m was withdrawn.
In total, Binance’s publicly announced wallets hold over $63bn in cryptocurrency assets, including over $2bn in Tether (USDT-USD).
Under the leadership of founder Changpeng “CZ” Zhao, Binance has become the world’s largest crypto exchange, dominating several sub-sectors such as cryptocurrency trading, digital arts, and venture capital.
Its influence has only grown after the collapse of Sam Bankman-Fried’s FTX exchange in November 2022, taking away one of its major competitors last year.
This month alone, Binance is responsible for nearly 70% of all trading volume in the spot market, compared to just 6% on Coinbase (COIN).
According to digital asset data provider Caco, Binance’s level of market dominance over the crypto industry is greater than that of Apple (AAPL) or Samsung (005930.KS) over the smartphone industry.
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