Binance exchange has announced that it will be temporarily freezing all the USDC withdrawals. This news came after the Binance customers withdrew around $2 billion from the exchange. This raises the question of why Binance users did a thing like this. According to experts, it has to do with the FTX collapse, as crypto users are not worried that Binance could fail as well.
According to Binance CEO 'Zhao,' there's no need to worry at all... He said that the reason behind this move was to perform an operation known as a token swap. This will improve the current holdings of Binance, which is important for dollar-pegged USDC.
In short, this move was taken to shore up the Binance reserves since the exchange is facing an increase in withdrawals.
US Investigation Into Binance Is Highly Likely
Recently, Binance has also come under the spotlight over issues related to its reserves and a possible investigation by US officials. Considering the crypto world is already rattled by the FTX collapse, these issues related to Binance have further raised the risk profile associated with crypto markets.
Binance exchange requires reserves in fiat current to swap the Binance USD in exchange for USDC. In other words, the firm must have an equal number of US Dollars in its reserves to continue the withdrawals.
According to Zhao, the banks were closed when this whole ordeal started. So as soon as the banks are opened within the next few hours, the situation will be back to normal.
USDC belongs to the category of stablecoins and thus has a fixed value of $1. In other words, its value remains equal to 1 USD, which makes it a great option to avoid volatility and market risks.
After the recent Binance trouble, the Binance Coin (BNB) also turned lower. According to experts, BNB shows the investor's sentiment toward the Binance exchange.
If we look at the possibility of an investigation into Binance by the USA, it is highly likely. According to confirmed reports, Binance processed around $10 billion worth of illegal money which is a violation of anti-money laundering regulations.