The SEC’s lawsuit against two major cryptocurrency exchanges resulted in high withdrawals from exchanges.
The US Securities and Exchange Commission’s (SEC) lawsuit against two major exchanges, Binance and Coinbase, caused panic in the industry. In order to eliminate this panic, the CEOs of both exchanges continue to inform the community about the situation after the news of the case fell on the media.
Withdrawals From Exchanges Increase After SEC Litigation
After the news of the SEC’s lawsuits against Binance, Binance US and Coinbase, withdrawals from these exchanges occurred. According to blockchain data, users have withdrawn around $4 billion in deposits in response to these lawsuits. According to data from blockchain analytics firms such as Nansen and Glassnode, there was a combined net outflow of $3.1 billion over the Ethereum network and $864 million in Bitcoin.
The SEC first filed suit against Binance, Binance US, and CEO CZ’” Zhao for alleged violations of federal securities laws. Coinbase was later sued by the SEC for offering unregistered securities to the public. Some of the tokens that the SEC considers as securities, Binance’s BNB, Cardano’s ADA, and Polygon’s MATIC, were impacted but devalued. The SEC froze holdings on Binance US, causing investors and market makers to walk away from the platform.
Crypto investors withdrew their funds from targeted exchanges en masse, fretting about regulatory restrictions. Binance experienced a significant exit in terms of trading volume as the world’s largest crypto exchange. Coinbase, on the other hand, experienced a large fund outflow on Ethereum. This, coupled with factors such as a reserve report that shook investor confidence and the collapse of FTX, led to a massive drop.
Although the wave of withdrawals due to these lawsuits represented only a small percentage of the assets on the exchanges, the exchanges processed the withdrawals quickly. Coinbase has told its users to be wary of the SEC’s tactics and withdraw USD as soon as possible. Binance US, on the other hand, suspended US dollar deposits and temporarily removed USD trading pairs.
