Cryptocurrency exchange Binance has seen a surge of withdrawals over the last 24 hours as investors appear to be spooked over recent news of regulatory action against Paxos and its stablecoin Binance USD (BUSD).
At the same time, the BUSD token has recorded significant redemptions, with 342 million BUSD burned over the last 24 hours according to Peckshield.
#PeckShieldAlert ~342M $BUSD have been burned at Paxos Treasury within the last 24 hours, $BUSD MarketCap: $15.8Bhttps://t.co/BMeVokqVE6 pic.twitter.com/hJdnixxbtD
— PeckShieldAlert (@PeckShieldAlert) February 14, 2023
On Feb. 12, news broke that the Securities and Exchange Commission (SEC) gave notice of potential enforcement action against Paxos. It alleged the stablecoin is an unregistered security, an assertion that Paxos denies.
Data compiled from the blockchain intelligence platform Nansen show Binance recorded 24-hour multichain token net outflows of $788.5 million, caused by outflows of $2.7 billion exceeding inflows of around $1.97 billion.
According to Dune analytics data, it’s the largest 24-hour net outflow since Dec. 17, 2022, when its proof-of-reserve audits were removed from auditor Mazars’ website.
Related: Are stablecoins securities? Well, it’s not so simple, say lawyers
Following the SEC’s action and a reported tip-off from USD Coin (USDC) issuer Circle, the New York Department of Financial Services (NYDFS) ordered Paxos to halt the issuance of BUSD on Feb. 13.
The outflows and token burns are a seeming response to the events, with crypto users cashing out of the stablecoin over fears of further regulatory action.
Binance’s reserves harbor the largest amount of BUSD, holding $14.4 billion worth of the stablecoin, or around 90% of the $16.1 billion current market cap.
The crypto exchange also has around $60 billion worth of reserves, with 22% of that made up of BUSD.
Binance told Cryptox that “funds are SAFU” — backed by a Secure Asset Fund for Users — echoing what Binance chief Changpeng “CZ” Zhao said earlier on Feb. 13.
