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Binance: Investors withdraw more than $2bn after enforcement action by US regulators

Changpeng Zhao, Co-Founder & CEO, Binance
Binance CEO Changpeng Zhao. Photo: Ben McShane/Sportsfile/Getty (Ben McShane via Getty Images)

Investors have pulled out $2bn (£1.62bn) from Binance over the past week, according to crypto analytics firm Nansen.

"The pace of withdrawals is heightened compared to normal activity and did pick up after the announcement [from the US regulator]," Andrew Thurman, an analyst at Nansen claimed.

Monday saw the US Commodity Futures Trading Commission (CTFC) file an 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.

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The CFTC classifies bitcoin (BTC-USD), ethereum (ETH-USD) and litecoin (LTC-USD) as commodities and has accused Binance of conducting unregistered derivative trading with these digital assets.

Read more: Crypto: Bitcoin, ethereum price | US charges FTX's Bankman-Fried with bribery

Binance founder Changpeng “CZ” Zhao has also been accused of encouraging Americans to “evade compliance controls” by the US regulator.

On Tuesday, Zhao dismissed the CFTC's accusations asserting that the crypto exchange "never engages in trading for profit or 'manipulating' the market in any situation."

But the outflows from Binance have only accelerated, and since the beginning of the week over $2bn has left the exchange, the majority of the withdrawals being made on the Ethereum blockchain.

Data from Nansen showed that the rate of withdrawals from Binance increased in the run up to, and following, the CFTC announcement.

Read more: Crypto roundup: US charges Sam Bankman-Fried | Binance faces CFTC | Bitcoin price

In the 12 hours leading up to the enforcement action announcement from the CFTC, Binance saw over $850m worth of cryptocurrencies removed from the exchange, according to Thanefield Capital.

And, just one hour after the announcement, an additional $240m was withdrawn.

Overall, Binance's publicly disclosed wallets hold more than $63bn worth of cryptocurrency assets, including over $2bn Tether (USDT-USD).

Under the leadership of founder Changpeng "CZ" Zhao, Binance has become the largest crypto exchange in the world, dominating multiple sub-sectors such as cryptocurrency trading, digital art, and venture capital.

Its influence has only grown after the removal of one of its major competitors last year, following the collapse of Sam Bankman-Fried's FTX exchange in November 2022.

This month alone, Binance has been responsible for approximately 70% of all trading volumes in the spot market, compared to only 6% on Coinbase (COIN).

According to digital asset data provider Kaiko, the level of market dominance that Binance holds over the crypto industry surpasses that of Apple (AAPL) or Samsung (005930.KS) over the smartphone industry.

Watch: China's alternative to ChatGPT: what we know so far | The Crypto Mile

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