SEC Clampdown Triggers Deposit Withdrawals Worth $4B

Lawsuits filed by the U.S. SEC against Binance.US, Binance and Coinbase have triggered a substantial withdrawal of approximate deposits totaling $4 billion from these prominent cryptocurrency exchanges, as indicated by blockchain data. According to Glassnode and Nansen data, the three exchanges collectively experienced net withdrawals of $864 million in Bitcoin and $3.1 billion through Ethereum last week. The withdrawals were swiftly and neatly processed by the exchanges throughout the week.

The SEC initiated legal action against Binance, its CEO Changpeng CZ Zhao and its U.S.-based subsidiary Binance.US last week, citing various violations of federal securities laws. Subsequently, the agency sued Coinbase a day later for exposing the public to unregistered securities.

These regulatory actions unsettled the cryptocurrency market, leading to a significant decline in tokens identified by the SEC as securities, including Polygon’s MATIC, Binance’s BNB and Cardano’s ADA. The SEC’s attempts to block access to assets on Binance.US forced market makers and traders to leave the platform as Ethereum and Bitcoin traded at a noticeable premium compared to other platforms.

In response to the regulatory crackdown, crypto traders retracted their funds in large quantities from the exchanges that the SEC had singled out.

Nansen data reveals that Binance, the biggest cryptocurrency exchange in the world based on trade volume, saw a net outflow of $2 billion on the Ethereum network over a four-day period. This sum includes ether as well as all other Ethereum-based tokens.

Glassnode data indicates that Bitcoin withdrawals also exceeded deposits by approximately $838 million during the same period.

Wednesday of last week saw the largest daily outflow of 13,953 BTC since December 2022 when investor confidence was shaken by a flawed reserve report and further weakened by the collapse of the FTX exchange. While the outflows last week were substantial, they only represent around 5% of all assets held on Binance, as reported by the exchange’s crypto wallets.

During the Monday-to-Thursday timeframe, Coinbase experienced net outflows of $1 billion through Ethereum, according to Nansen. Glassnode data suggests that BTC outflows amounted to $25 million.

As per Nansen data, Binance.US recorded net outflows of $75 million on the Ethereum network. However, Glassnode does not track this particular platform.

Responding to the SEC’s “intimidating and aggressive actions,” the exchange announced on Friday that users should withdraw their funds as soon as possible. Additionally, the platform suspended deposits and will soon delist USD trading pairs, transitioning temporarily to a cryptocurrency-only exchange.

It remains to be seen how these regulatory developments will affect other players in the crypto space, such as Marathon Digital Holdings Inc. (NASDAQ: MARA), over the coming months and years.

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