Binance freezes withdrawals of stablecoin USDC as investors pull $2B

https://markets.businessinsider.com/news/currencies/crypto-binance-freeze-usdc-withdrawals-changpeng-zhao-cz-ftx-collapse-2022-12

by manholio • 4 years ago

441 277 4 years ago

markets.businessinsider.com

drbig• 4 years ago

https://archive.ph/tb4rs - "Binance halted USDC withdrawals after customers pulled over $2 billion worth of cryptocurrency from the exchange Monday, according to data from blockchain intelligence platform Nansen."

ww520• 4 years ago

Are people withdrawing the USDC coins or the USD behind the coins?

4pkjai3• 4 years ago

The crypto coins. Binance is a Crypto to Crypto exchange. You can't deposit or withdraw USD from Binance.

schemescape• 4 years ago

Any idea why a New York bank is relevant then (per CZ)?

tromp• 4 years ago

These Binance web-pages suggests otherwise:

[1] https://www.binance.com/en/support/faq/how-to-buy-cryptos-wi...

[2] https://www.binance.com/en/fiat/deposit

jqpabc1237• 4 years ago

Either way, it's money leaving the exchange. This is what the "halt" is attempting to address if I read it correctly.

The "dark side" of crypto is being made painfully obvious for all to see.

mypastself• 4 years ago

I assumed people were moving USDC to other wallets (most likely other exchanges). But now that you mention it, I’m not so sure. Because one could signify mistrust in the token, the other in the exchange.

22c• 4 years ago

These seem to be the most relevant tweets:

https://twitter.com/cz_binance/status/1602579499903852544

https://twitter.com/binance/status/1602708590271385600

I'm not sure why USDC withdrawals were paused rather than trades on USDP/USDC and BUSD/USDC pairs temporarily disabled. I assume there were trade-offs or technical reasons why it was done this way.

JumpCrisscross6• 4 years ago

Binance Coin — a native token that is seen as reflecting customers' trust in the exchange — had slipped 5.12% to trade at just under $269 at last check Tuesday

rngname22• 4 years ago

The most painful thing in my life is the fact I was sitting there thinking about putting 500-5000 usd into BNB at its token launch (for fractions of a penny), literally filling out KYC forms but ultimately felt it felt too risky to wire money overseas to a nascent Chinese crypto exchange.

But then again, my risk aversion / caution in life has probably saved my life from car accidents or overdose so ehh whatever.

NotYourLawyer3• 4 years ago

And you probably would have cashed out at a 10x multiple or whatever, so it’s not like you’d be a zillionaire today anyway.

jqpabc1237• 4 years ago

every digital dollar of USDC can always be exchanged 1:1 for cash.

Well ... maybe not always ... and never without fees attached.

Finnucane• 4 years ago

I will glad pay you Tuesday for a binanceburger today.

japoco• 4 years ago

This is not what is happening here, the USDC peg to the dollar has nothing to do with this. The problem is that Binance converts every stablecoin you deposit there to BUSD, and so if you want to withdraw say USDC or USDT even they’d have to convert them, which is apparently what they’re having trouble to do.

jqpabc1237• 4 years ago

the USDC peg to the dollar has nothing to do with this.

I never said it did.

The problem is that Binance converts every stablecoin you deposit there to BUSD

The real problem is that Binance can do whatever *they* want with your deposits --- including refuse to return them.

The real problem is that the crypto market is about as far removed from *trustless* or *decentralized* as is imaginable or possible.

The real problem is that people who say they don't trust government will readily trust FTX or BlockFi or Voyager or Celsius or Binance or Bitfinex --- all of which have been shown to be far less worthy of it in my opinion.

bb88• 4 years ago

USDC is supposed to be the good stablecoin.

modeless• 4 years ago

Maybe that's why they can't print it out of thin air...

birracerveza• 4 years ago

If you give me 100 USDC and I pinky promise to give them back but then I don't, whose fault is it? USDC's?

oneoff7865• 4 years ago

Really it depends on why you didn’t / couldn’t.

josefx• 4 years ago

They are one of the exchanges prominently listed by Circle as part of its ecosystem. Of course the fine print says that they don't endorse any of the companies they list, but what does it say about the ecosystem if they can't even list one trustworthy partner and instead list groups they explicitly don't trust themselves?

Honest coin salesman: Look you want to trade honest coins? Down that alley is seedy Joe he is one of the local traders, on a good day there is only a 50% chance that he will mug you.

yokem55• 4 years ago

This is a Binance problem, not a USDC problem. Now if Coinbase were to not honor USDC withdrawals or swaps to normal USD, it would be fair to say somwthing is wrong with USDC, but that is not the case here.

NotYourLawyer3• 4 years ago

SBF was supposed to be the good guy. FTX was supposed to be the good exchange.

It’s crypto. It’s made of lies.

ldbooth• 4 years ago

Yikes. This could be the first inning of the Tether bubble deflating, and by extension half the crypto market.

rapsey• 4 years ago

Just like the last 10 times

mjr00• 4 years ago

Half is optimistic. Tether destabilizing probably drops all crypto over 90%.

Don't think it will happen, necessarily, but it's largely the only thing keeping crypto together at this point, price-wise.

yladiz• 4 years ago

Do you mean it's the only thing... tethering crypto together?

paulpauper• 4 years ago

We will have to wait and see

all the major stable coins still holding pegs

hef198986• 4 years ago

Didn't something similar happen in 2008 as well? When mortgage backed securities dropped but the opposite default swaps (?, I'd have to look it up), didn't move?

JumpCrisscross6• 4 years ago

the major stable coins still holding pegs

How? In what assets? Even in Treasuries, tens of billions of unexpected sales in an off run will depress prices. If deposited in a podunk bank, it might literally go under.

neilv• 4 years ago

Whenever there are runs on businesses in the "crypto" scam space, I wonder whether the withdrawals/cashouts that did/do get through are connected to whomever runs that business, before slamming the door on unconnected people.

spookthesunset2• 4 years ago

Of course that is what happened. It’s crypto. It’s scams and exit scams all the way down. Always was always will be.

4pkjai3• 4 years ago

This might be why BTC is shooting up at the moment. If you can't withdraw your stable coins you might as well buy Bitcoin and withdraw that.

jscottmiller• 4 years ago

This is exactly what happened at Mt Gox almost a decade ago.

dbancajas• 4 years ago

except those BTCs are not real. They are just pretend BTC in your account. You have to send it to your wallet

latchkey6• 4 years ago

Or it could be on the news that SBF was arrested?

JofArnold• 4 years ago

More likely it's reacting to inflation data.

cableshaft• 4 years ago

Yeah, this is almost certainly what's going on. Lower inflation has juiced up its price in the past, same with stocks.

Several of my stock holdings are up the same amount as Bitcoin is today.

roflyear• 4 years ago

No, BTC is just fairly correlated with the US stock market.

shadycuz• 4 years ago

Looking forward to the Matt Levine break down in his daily news letter. Only way I can understand most of these finance things.

RobLach• 4 years ago

The moment you halt withdrawals, the jig is up.

hall0ween• 4 years ago

I'm no crypto expert here, admittedly. Isn't the point of decentralization to avoid this level of control?

It's like the crypto 'investor' response is "Decentralization...that's not so important. What we really want is sheer, unaltered speculation."

quags• 4 years ago

Nothing prevents being decentralized and continuing that route but it requires more knowledge , it is harder , still has risk and crypto would not be as large with out the central players. Centralized and regulated crypto exchanges keeping the ability to have decentralized wallets is the best of both worlds. That is the way this is going barring making it illegal to hold your own wallet or sending decentralized payments which certainly isn’t an impossible scenario.

WalterSear• 4 years ago

That's not the point. It's the beard.

concinds• 4 years ago

The decentralised technologies are still groundbreaking and trustworthy. But you can’t market that, so it doesn’t get adopted. The lowest common denominator goes for the stuff that’s heavily advertised, like centralised exchanges (scams), stablecoins (scams), and leveraged retail investing (scam). If Tom Brady got paid to make an ad, surely that means the product is trustworthy?! You can’t fight human stupidity.

kayamon2• 4 years ago

Bitcoin has continued clearing transactions throughout, just as it always has since its creation.

Crypto != Bitcoin.

themagician• 4 years ago

Centralization is required because not enough people are willing to spend real dollars, so no large organic P2P market exists (especially for majority of the altcoins). Instead you need central authority to make dollars, which is what all these exchanges do. They try to mask this behavior as best they can, but their purposes it to create dollars so that liquidity can be provided for those who want to cash out.

MerelyMortal• 4 years ago

Binance has been halting withdraws on various coins for BS reasons for a while now. The jig has been up for a while, just not everyone is paying attention.

Octokiddie• 4 years ago

The world's biggest crypto exchange will freeze all withdrawals of USD Coin while it conducts a "token swap" to boost its holdings of the dollar-pegged cryptocurrency, the crypto group's CEO Changpeng Zhao said Tuesday

It's worth noting that USDC is not even a token controlled by Binance. It's controlled and issued by Circle. So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand.

That's called a "default."

Why? The article says something about a key bank being closed. Nonsense. Is the USDC held at that bank? No. Binance is allegedly holding it. Only clearly they're not because they can't produce it on demand.

I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. Underneath all of the slick marketing and nerd posturing is a simple truth: these are all fractional reserve systems. Conceptually, they are no different than banks or pyramid schemes.

The only possible reason you want a stable coin, rather than dollars, in the first place is because you're doing something that requires you to route around US financial regulation.

The US dollar is digital. It moves around the world using a digital network. It's traded the world over by almost every country whether they want to or not. You can buy almost anything there is to buy with US dollars.

You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation.

yashg• 4 years ago

Also pumping the price of a token without putting in actual money. When you can issue unlimited number of casino chips, you can sell an imaginary asset using as many chips as you want. Better still, get all casinos to accept each others chips to buy and sell those imaginary worthless tokens to lend credibility to chips and tokens.

jaltekruse2• 4 years ago

I think there is an important missing part of this argument that many of the current paths to move dollars around that network in the traditional system take either days to settle and/or cost quite a lot in fees. I see crypto having potential to optimize lots of things and introduce extra trust from a technical infrastructure standpoint. Right now my traditional money is sitting in several digital banks or brokerages that I have no idea how well made they are underneath, I just see a website I can interact with. Crypto doesn't solve problems about where the coins meet the real world, even a stable coin with publicly auditable holdings to back it can have secret debt leveraged against those assets. Those problems seem only possible to resolve with regulation as it has been with the traditional financial system, but standardizing protocols to move money around and reducing lead time and/or fees as crypto evolves could really help the financial system be more flexible. With everyone carrying around a smartphone it really should make us question why so much money needs to move through the major credit card networks, we don't need their special hardware anymore.

jaltekruse2• 4 years ago

Unfortunately the current (and seemingly somewhat inevitable) architecture of cryptocurrency, relies on trustless distributed systems, which I don't see a clear path to making them give similar SLAs or UX to the traditional system with centralized authorities and defenses against "double spending", which really just isn't discussed outside of crypto because it was such an obvious thing to solve for our current system makes it so close to impossible (and that is part of the reason for the lead times discussed in my previous comment).

xapata• 4 years ago

The credit card companies have built trust with merchants around the world that they'll settle up eventually, and that anyone (or most people) carrying their cards will pay their bills. If a cryptocurrency system were to try to supplant that, it'd need a form of revolving credit. I want to pay my bills at the end of the month, not immediately.

markonen• 4 years ago

You can absolutely regulate towards the goal of affordable, instantaneous money transfers within the context of the traditional finance system. The EU has done just that with SEPA (Single Euro Payments Area).

Here's the SEPA instant credit transfer service (maximum duration of ten seconds): https://www.europeanpaymentscouncil.eu/what-we-do/sepa-insta...

twelve402• 4 years ago

how about risk management? when i pay using a credit card, i know if things go sideways i can always dispute and most likely will get my money back. If I pay with bitcoin or even with cash or checks, i'm fucked. Not sure if Visa/MC duopoly specifically is the most efficient way to handle this risk, but it is a thing.

P.S. also too not sure how special credit card hardware is a problem anymore, if you want to pay with your phone, there are more and more options every year to do that, and even tie that to a credit card (for benefit of risk and/or points).

capableweb• 4 years ago

Not saying the rest of your comment is right or wrong but this part sticks out:

It's traded the world over by almost every country whether they want to or not. You can buy almost anything there is to buy with US dollars.

That's definitely not true. Most places in the world, I'd wager, do not accept USD, as you seem to think. I can't even begin to count the times I've seen clueless American tourists in South America, Africa, Europe and Asia trying to pay with their "highly regarded" USD and being denied with laughs. And then being shocked at the results.

notch656a4• 4 years ago

Lol almost no one in South America is laughing at USD. I've been to 3 of the 4 continents you mention and spent USD directly in all of them but Europe. Hello in many south america countries you get better prices even adjusted for true exchange rate because no one wants dog-shit <national currency> and it saves them a trip to the money-trader before their money turns into kindling.

axoltl• 4 years ago

I don't think the parent comment was referring to buying an ice cream cone, but rather things traded on the open market.

wpietri• 4 years ago

US dollar-like liquidity and value preservation without US dollar financial regulation.

Or in other words, they'd like the benefits of regulation without the costs of regulation. Which I certainly appreciate. As a child my plan for adulthood was desserts all the time, no vegetables ever.

notch656a4• 4 years ago

More like they trusted two (well actually three if you count US gov) centralized entities instead of one. It's like asking permission from both momma and pappa to eat desert. They should have just depended on the single entity backing USDC rather than putting themselves in a situation where they'd be also be fucked if Binance froze by leaving their tokens on exchange.

When you put USD backed stablecoin on exchange you're trusting

1) Exchange won't fail

2) Backers won't fail

3) US gov won't fail

Any single one fail and you're fucked. America decided dollars should float in the 70s, and most of the world followed. IMO sooner or later crypto will end up all floating because pegging relies on centralized points of failure and eventually people will tire of getting wiped out.

jacobsimon3• 4 years ago

Stablecoins have totally valid use cases in the crypto ecosystem that don’t involve skirting regulations. People want something that isn’t volatile. It takes days to deposit and withdraw actual USD from exchanges and requires centralized entities that charge fees (or are totally untrustworthy as we’ve seen). Contracts and dapps can hold and interact with USDC to create useful applications that aren’t just speculative investing.

datadata• 4 years ago

You could say the same thing about Eurodollars-- "US Dollar" denominated assets that are held in banks outside the United States and not subject to US Bank regulations. The size of this market is more than 10x all of crypto.

BobbyJo• 4 years ago

You could an you'd be right. Although, then you are trading one regulatory body for another, which you can do pretty freely with currency trading.

Crypto is where you go if you don't want any regulatory bodies at all.

dboreham2• 4 years ago

Wait...they're refusing to allow on-chain transfer of USDC from their custodial account to a customer's wallet? I assumed this was about exchange of USDC to fiat, hence the hand waving about banks.

fallingknife3• 4 years ago

Not your key, not your crypto.

wmf2• 4 years ago

So let's imagine that Binance has $4B of USD customer liabilities backed by $2B of USDC and $2B of BUSD. Fully solvent and fully liquid. Then customers try to withdraw $3B of USDC which Binance does not have. Binance would be happy to give you BUSD but for whatever reason customers specifically want USDC.

(I am absolutely convinced that Binance is evil but this specific situation does not appear particularly bad.)

2OEH8eoCRo0• 4 years ago

I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again.

They say a lot of words but they don't understand them. Also greed and pride.

flamemyst3• 4 years ago

You misses where Binance doing automatic conversion for any deposited USDC to BUSD. So every USDC deposit will counted as BUSD.

Withdrawal using BUSD and USDT is still available. Even USDC on some chain are still open. As I understand they just need time to replenish their USDC.

BUSD is released by Paxos.

bellip3• 4 years ago

Yes, it's digital already. However banks manage the whole system and they can do whatever they want with your money if you are nobody.

I have been waiting for 2 and a half months for an international payment via SWIFT, I worked long hours for that money and I needed it urgently. The money left the sender's account 2 and a half months ago. Neither of us has the money in our accounts while the bank tells us to just wait a little bit longer, or they do not know where the amount is, some nonsense about beneficiary bank holding/releasing my money. Whereas a friend just sent me a hefty figure (mid 5 figures) of crypto by withdrawing it out of Binance Global to my personal wallet, it was confirmed in 15 minutes and I got the money in my account in 10 minutes. I sent the crypto to my local (Binance has different companies/legal bodies in different countries) Binance account, converted it to a currency of my liking and withdrew it to my personal bank account. All under 20-30 minutes and I have the money now.

Not endorsing Binance or any other central exchange (my personal position is: not your keys, not your coins, I would never hold a big amount in any central exchange), but I do not understand HN's (majority of HN's) position against crypto in general. Maybe you are privileged enough to never have this kind of issues, but some of us do. Some of us live in countries with hostile governments, (which government isnt hostile towards the public anyways? /s).

hef198986• 4 years ago

It seems FTX was perfectly able to do whatwver they wanted, through Alameda, with customer deposits as well. Banks on the other are much better regulated, and for very valid reasons as current events show.

gamblor9562• 4 years ago

SWIFT does not take 2 months; it takes minutes or hours. Your bank already has your money or it never received it.

More likely, they are holding your money due to some issues with your local KYC laws. (This is especially likely in South America, where foreign senders must verify the source and purpose of payments made to local residents.)

rvz• 4 years ago

Maybe you are privileged enough to never have this kind of issues, but some of us do.

Correct.

The eternal hate for crypto is by a screaming minority who are too privileged to even bother realising the majority of people are worse off in countries like Argentina, Nigeria, and Turkey which their currencies have lost over 80% of their value and is quite frankly worthless.

Using USDC as a cheap, fast, global way of sending money is a good alternative for those that don't have a choice in those countries. For those that keep shouting the existing solutions: Wise is neither same day or cheap to send money globally, . Same is true with SWIFT. FedNoW only works in the US and is not global and UPI is also not global.

Crypto and stablecoins tick all the boxes as a 24/7 cheap and very fast way of sending money globally.

gpderetta2• 4 years ago

Couldn't the transfer from Binance to your bank account take two months as well in principle?

jasonlingx• 4 years ago

So here’s where there might be some confusion, Binance consolidates a pool of different stable coins into 1 “BUSD” balance for its users[0]. Depositing any of these stablecoins into Binance will add to your BUSD balance, and you can withdraw from it as any stablecoin of your choice. What CZ is saying is that they ran out of USDC but have plenty of the other stablecoins instead. It sounds like they need to redeem the other stablecoins to fiat USD and send it to Circle to mint USDC with it, hence the talk about the bank.

[0]https://www.binance.com/en/support/announcement/binance-to-a...

kikokikokiko5• 4 years ago

So, they need to find gullible 3rd parties that accept to give them hard cash (USD) in exchange for their in house created clown money (BUSD), and then use this hard cash to go to the market and buy USDC. How is this different from FTX padding their balance sheet with billions of their own made up clown money? Crypto is ponzies all the way down.

soerxpso• 4 years ago

So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand. That's called a "default."

What? So if I go into the bank at 4 AM and ask to withdraw $100,000, and they respond, "Sure, we'll need a few hours to get those funds together," the bank has defaulted?

dheera2• 4 years ago

Presumably they just need to wait until 9am when people at work, so I wouldn't consider that a default.

If they say they need a few hours at 9am, they've defaulted. It would be a big "ha" if they couldn't get them together by 9:05am because they've done shady things with your money.

hef198986• 4 years ago

Cash withdrawls have a ohysical aspect, cash. In the case of Binance, there is no such aspect. Obviously, banks have limits around cash withdrawls not the least due to limited amount of cash at hand at a given sight. Banks will happily allow you to wire transfer money wherever you want, since this is only a virtuap things and banks are required to have enough liquidity to serve those requests.

Crypto is no like cash.

Gwypaas• 4 years ago

Brokers are not banks. For real financial systems your stock are held 1:1 in a custody account in a separate company with regulations making sure you get to keep your stock even in the case of bankruptcy of the broker.

You can sell all your holdings at any second during the trading hours, no delay, the only problem you might face is that no buyers exist. That is something completely separate though.

What the crypto exchanges are doing is taking the Apple stock you think you bought and instead buy Wal-Mart. Hoping to pocket the difference when you eventually sell.

This works when the line goes up, or when you are a incredibly tightly regulated bank where the government through FDIC like schemes ensure that you will get your money back, even if the bank screws up.

https://en.wikipedia.org/wiki/Deposit_insurance

vkou2• 4 years ago

These aren't fractional reserve systems, a fractional reserve system requires liquid and illiquid assets to exceed liabilities.

This is just a fraud. :) You can tell, because they seem to be incapable of passing anything resembling an audit.

jerf• 4 years ago

'So effectively, Binance is refusing to honor its commitment to depositors to give them their money on demand. That's called a "default."'

Not in $CURRENT_YEAR it's not. In $CURRENT_YEAR it's not a default until the holder in question publicly and willingly admits it's a default. Otherwise, it's just a technical maintenance period, or a temporary suspension of withdrawal rights, or a customer-value preserving intervention, or a response to current market conditions, or just another step on our amazing journey to world-class reliability and customer satisfaction, or whatever, and only crazy conspiracy theorists who are probably going to be happy staying poor would say that a default is as simple as "you ask for something that is yours and you don't get it", regardless of the reasons why you don't get it.

That is sooo $CURRENT_YEAR-1 of you to think something so simplistic and unsophisticated. Clearly there are just a ton of reasons why you might ask for something that is yours, and not get it, that aren't anything as ugly as a default. Please. So plebian. And I can hardly believe that some knuckle-dragging cretins think a default should be treated by everyone as a default rather than just sort of glossed over with a vaguely stern look on your face before proceeding on as if nothing has happened.

(For a bit of context, it's not just the cryptocurrency space that has forgotten the fundamentals lately & I have to admit I'm getting a bit crabby about it. There is a time and a place for nuance, and there is a time and place for stubborn insistence on basic facts of reality and waving away any attempt at "nuance" as obfuscatory lies. The definition of default is one of them. Either you return my stuff on demand or you don't. Explaining why you failed your obligations does not mean that you met your obligations.)

three_seagrass• 4 years ago

I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again. Underneath all of the slick marketing and nerd posturing is a simple truth: these are all fractional reserve systems. Conceptually, they are no different than banks or pyramid schemes.

There are rational people who knowingly invest in ponzi and other schemes because they think they can get out before the music stops playing.

Some ultimately do, and some ultimately get caught.

TacticalCoder• 4 years ago

You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation.

That is not at all why people need/want USDC. People want stable coins because banks are all too happy refusing/blocking/reversing transactions to/from cryptocurrencies exchanges.

They hypocrisy of both banks and the states on this one is amazing: "it's all a ponzi" / "it's all criminal money" / "only fraustres use cryptocurrencies"

But then...

"Please pay your due taxes made on crypto".

FWIW France, at least, took a less dumb approach than many on the subject: conversions to/from crypto and stablecoins aren't a taxable event. It's only if you manage to cash out (and that's a gigantic "if") to actual EUR that taxes to the state are due. It solves at least the problem where people legally need to pay taxes but concretely cannot get money out of the crypto exchanges.

Sending from, say, Coinbase to a bank for tiny amount is relatively easy. But I'm atm helping someone "cash out" a 7 digits sum in France and it's hard. Extremely hard. It's near impossible actually to get one bank to approve the withdrawal from Coinbase. Saying: "I entered Bitcoin in 2016 and ETH when it was at 50 cents" ain't sufficient. They don't seem to understand that the KYC/AML is done to catch drug and arms dealers, organs traffickers, and pedophiles selling CSAM.

That's why there's KYC/AML right? To catch these guys.

But a 35 years old mom who made bank on crypto? That's no pedophile. No arm dealer. No drug dealer. And yet it's not clear if she'll ever be able to cash out.

That's why people are using USDC. Credit cards withdrawing from your USDC? Bring it on. Coinbase giving x% annual return on your return, please, keep it coming (btw even in France taxes are due on these annual yield). There's a shop here selling high-end second hand watches (you know, the kind of watches worth more used than new) that accepts crypto: maybe a way to get something out of your crypto.

Now I don't know if the short term US treasuries, whose numbers are all published, backing the USDC all actually exist and are really held at BNY Melon. Maybe it's all a scam. Maybe Coinbase shall rug pull too. Maybe BNY Melon shall rug pull.

For all I know, heck, maybe Uncle Sam himself is going to rug pull on the treasuries backing the USDC (I shouldn't give these people ideas but they maybe already fancied the idea anyway: "crypto are only scams, we're defaulting on the US treasuries backing stable coins"... and many idiots would applaude).

But USDC still looks, to me, more legit than USDT / Binance USD / etc.

That's why most people are using USDC: it's the least smelly of them all and the banks do no let people easily sell their crypto for real USD / EUR.

Meanwhile, as I mentioned, the state wants its taxes on crypto gains.

It's the state and the state lovers who want to have their cake and eat it too: they want to prevent people from cashing out their crypto "because pedophiles and criminals" but still want their taxes made on crypto "gains".

That's why people are using stable coins.

If people were actually free to use their money, free to do wire transfer to/from Coinbase at will, there wouldn't be that much need for stable coins.

But people aren't free to use their money as they want.

JetSpiegel• 4 years ago

35 years old mom would be the perfect cover for an arms dealer to cash out...

trotro• 4 years ago

You "need" a stable coin because you're trying to have your cake and eat it too: US dollar-like liquidity and value preservation without US dollar financial regulation.

What about transferring value anonymously? Apart from cash and stable coins, every way of transferring stable assets (wire transfer, Venmo, WU,...) requires a copious amount of KYC and hence a complete loss of privacy (as well as serious security risks given how some of these private companies can misuse personal data).

I don't mind people criticizing Binance, CEXs, and even the crypto industry in general, but I find it quite sad to see people, especially here on HN, essentially advocating for the end of any sort of financial privacy.

nibbleshifter4• 4 years ago

essentially advocating for the end of any sort of financial privacy.

See the recent thread about cash transaction limits in the EU, an awful lot of HN users celebrating further restrictions that limit/erode financial privacy.

autokad• 4 years ago

I'm really shocked more aren't talking about how binance 'failed' an audit for proof of reserves.

nathias• 4 years ago

yes, of course the goal is to avoid US dollar, and no not all stable coins are fractional reserve systems

rodgerd• 4 years ago

I'm frankly amazed that people with the ability to understand this alphabet soup mumbo jumbo keep falling for the same scam over and over again.

You can't cheat an honest man, but it's easy to scam people who think that they've found a loophole.

quentinadam• 4 years ago

May I suggest the below insights to your point of view, which will allow you to have a better understanding of what is happening underneath the hood ?

USDC is issued by circle.com and the underlying assets are held on US bank accounts.

BUSD, which is Binance's USD stablecoin, is actually issued by paxos.com (see https://paxos.com/busd/) and the underlying assets are held on US bank accounts .

Binance definitely has accounts at both Circle and Paxos, that allow them to mint and redeem USDC and BUSD, by depositing or (respectively) withdrawing USD to Circle's or Paxos' bank account.

In September, Binance announced that all USDC deposits made on Binance would be converted to BUSD at 1:1 (https://www.binance.com/en/support/announcement/binance-to-a...). The move was indeed an attempt to boost the adoption of BUSD, which is the third largest stablecoin with a market cap of $19B, behind USDC which is the second largest with a market cap of $43B (see https://coinmarketcap.com/view/stablecoin/).

From a practical point of view, what Binance did was redeeming the USDC (by sending them back to Circle and withdrawing USD to it's bank account) and then subsequently minting BUSD (by wiring the USD to Paxos' bank account and receiving the corresponding amount of BUSD).

Binance also allows to "seamlessly" withdraw BUSD as USDC from it's exchange to your wallet.

Now you are starting to understand what happened today.

Following negative rumours, people started to massively withdraw BUSD as USDC from Binance. Binance fullfilled to first part of those withdrawal requests from it's hot wallets containing USDC, but past a certain amount it had no USDC left and temporarily halted withdrawals of USDC. A caveat to that is that Binance only halted withdrawals of USDC on the Ethereum and Tron chains. Withdrawal of USDC to Polygon and Avalanche for example have been running smooth all day, probably because less people choose those options, so there were still funds available on Binance's hot wallets on these chains.

Once the hot wallets were depleted of USDC on Ethereum and Tron, Binance could only continue to honor the withdrawal requests by converting the BUSD it held to USDC. That conversion requires to redeem the BUSD at Paxos, receiving USD on it's bank account, sending the USD to Circle, and receiving the corresponding amount of USDC. These steps involve regular wires between banks, hence why they could not be executed before the US banks opened.

That being said, the situation is now resolved and Binance has now re-enabled withdrawals of USDC.

TimJRobinson• 4 years ago

The only possible reason you want a stable coin, rather than dollars, in the first place is because you're doing something that requires you to route around US financial regulation.

This reeks of US centric privilege. Very similar to "the only people that want privacy are criminals". There are plenty of countries that you can't access UD dollars that would prefer to hold them than their own currency.

tnel774• 4 years ago

“Crypto sucks. This is proof.”

Exchanges going under proves that people are greedy and/or stupid, but it doesn’t inherently mean every crypto project is bad. It doesn’t seem like people holding their own keys are having a bad time right now. Sure, prices of these assets are down, but a hardware wallet is an easy way to make sure your assets don’t end up being given away during a bankruptcy proceeding.

JumpCrisscross6• 4 years ago

doesn’t inherently mean every crypto project is bad

No, but it’s lost the benefit of doubt.

Starting from the position that crypto is likely fraud, and those participating in it are facilitating (wittingly or not) money laundering, is spreading from financial peripheries to money centre economies.

jbverschoor• 4 years ago

You mean the benefit of the greed

echelon2• 4 years ago

After all of this fallout, the only people left that will even touch crypto will be the ones that understand how to set up and use a hardware wallet.

I don't think that will be a very large market.

tnel774• 4 years ago

Perhaps. I’m guessing that the sting will wear off and newcomers will venture into crypto sometime in the future. I personally view these crashes as a necessary cleansing since so many scam/meme projects get created every go around.

anon2912• 4 years ago

doesn’t seem like people holding their own keys are having a bad time right now

Considering that, instead of owning productive assets that make society better as a whole and provide real value to people, they own tokens that so far do nothing and are only useful due to the exchanges, then yes... that's a pretty bad time.

tnel774• 4 years ago

There’s no denying that people “hodling” projects like “DickCoin” are probably having a bad time. I’d suspect that people who invested in more sound projects (Bitcoin and Ethereum, for example) might do just fine in a few years.

FrameworkFred• 4 years ago

I agree. I don't think paper money is a bad idea because some countries finance their operations by printing as much as they need.

I do suspect that blockchain's killer app may not be tradeable securities, or rights, but something more mundane like Walmart's inventory reconciliation system.

Imnimo• 4 years ago

Out of curiosity, did Binance's recent faux-audit cover USDC reserves?

Macha• 4 years ago

Boom.

latchkey6• 4 years ago

I'm not defending Binance in any way, but this is FUD that is getting blown out of the water (arguably, people are on edge these days). It was pre-announced downtime for a hardfork on their BSC chain.

https://twitter.com/cz_binance/status/1602510004795367424

It has caused a bit of a bank run and cz says things are processing just fine (along with tons of 3rd party confirmations).

https://twitter.com/cz_binance/status/1602676998094069760

I know HN wants to see crypto die in a giant ball of flaming fire, but let's not lower ourselves to the point of just passing on FUD.

Edit: -4 incoming. I'm going to leave this here because it is worth it. I'm not a fan of FUD and neither should you be.

Sebguer• 4 years ago

"A bit of a bank run" is like saying "a small nuclear bomb".

salawat• 4 years ago

Interesting that a bank run, (non-banks restoring theor fiscal custody of their own money, leaving the banking empty) is considered analogous to a weapon of mass destruction.

What's so taboo about everyone having their own money in hand?

eschulz• 4 years ago

You can't get a little bit pregnant

treis• 4 years ago

This is a terrible low effort post. Anyone holding a large amount of crypto should have the majority of it in a cold wallet. It should take a significant amount of time to make that transfer because it should involve significant controls like multiple people travelling to a secure site.

An honest crypto exchange might see a "bit of a bank run" without raising any significant alarm.

jqpabc1237• 4 years ago

I know HN wants to see crypto die in a giant ball of flaming fire,

Or maybe crypto has always been a "giant ball of flaming fire" and HN is just trying to discourage people from throwing real money into it.

jjulius2• 4 years ago

I'm not defending Binance in any way, but this is FUD that is getting blown out of the water (arguably, people are on edge these days). It was pre-announced downtime for a hardfork on their BSC chain.
https://twitter.com/cz_binance/status/1602510004795367424
It has caused a bit of a bank run and cz says things are processing just fine (along with tons of 3rd party confirmations).
https://twitter.com/cz_binance/status/1602676998094069760
I know HN wants to see crypto die in a giant ball of flaming fire, but let's not lower ourselves to the point of just passing on FUD.
Edit: -4 incoming. I'm going to leave this here because it is worth it. I'm not a fan of FUD and neither should you be.

I'm going to quote this full comment for posterity's sake, but I also think that you're a bit confused. You say that "it was pre-announced downtime" and cite a tweet from yesterday that says "Also done now. All resumed". In point of fact, withdrawals are not resumed, and a tweet from CZ today confirms that withdrawals are down and they're waiting for a US bank to open[1].

Edit: Shit, Binance themselves even admit this is because of a token swap, not planned downtime[2]. How is this FUD?

Edit 2: Withdrawals back online as of ~5 minutes prior to my comment[3].

[1]https://twitter.com/cz_binance/status/1602579499903852544

[2]https://twitter.com/binance/status/1602579775721283584

[3]https://twitter.com/binance/status/1602708590271385600

latchkey6• 4 years ago

Weird flex, I'm fine with my comment and promise that I won't edit it any further.

Yes, the downtime was yesterday, scroll up on the thread that I quoted. The FUD started with this tweet:

https://twitter.com/Travis_Kling/status/1602400700192985100

The point being that this is FUD, and HN is pushing something full of it. Which is gross and low bar.

If Binance does go belly up, it won't be because of USDC withdrawals being paused. It will be a lot deeper than that and will likely cover USDT, since the majority of their customers are outside of the US (or at least should be, legally) and because, well, USDT.

Hours after that tweet you quoted (which was at 12am), things are processing as normal.

adrr• 4 years ago

Do we know what token they swapped USDC for? Why would you swap a stable coin for another token? Didn't FTX swap coins for their native currency and use the proceeds for Alameda?

ChainOfFools• 4 years ago

In point of fact, withdrawals are not resumed, and a tweet from CZ today confirms that withdrawals are down and they're waiting for a US bank to open

Thus the proper expansion of the initialism FUD is, (directed at grandparent,) "Facts U Dislike"

freejazz• 4 years ago

I will never trust anyone that uses the word "FUD"

jankyxenon• 4 years ago

The opposite of fear, uncertainty and doubt would be something like optimism, certitude and faith.

I'd rather apply a lens of FUD to hard problems than the latter.

dogman144• 4 years ago

I am… fairly well versed in this area. This is a nonsense take because:

- USDC is on eth, BSC chain halts impact USDC is like saying apple halted because android updated. Did not see anything to indicate it was USDC on BSC, but if so that changes things. If they did USDC -> BUSD, still should have 0 impact on w/ds off-platform.

- managing liquidity reqs via silvergate or w/e the USDC w/d bank is called is managed just fine without USDC down time by plenty of other parties conducting USDC treasury operations.

At best, this indicates binance has really bad treasury management and is cause for concern. At worse, smoke -> fire. Anything to do with internal treasury ops (fair enough, do a pause) does not have cascading effects on user w/ds

dwighttk• 4 years ago

How’s Coinbase holding up?

latchkey6• 4 years ago

Looks at the status page, seems green.

https://status.coinbase.com/

mannykannot• 4 years ago

If you issue a "proof of reserve report" that looks like you are trying to hide something, don't be surprised if people conclude exactly that.

pyb• 4 years ago

If they need to "boost their holdings" in USDC in order for their customers to withdraw these coins, what had they been doing with their customer's deposits ?

guessbest• 4 years ago

Funny, it is an "exchange" that takes a deposit, but doesn't actually purchase the promised cryto holding until a withdraw is made.

rosnd• 4 years ago

Binance delisted USDC in september, since then the only way to "purchase" USDC on Binance has been by requesting and USD withdrawal via USDC.

JaggerFoo• 4 years ago

Wow, a lot of histrionics in the comments.

Like a wise man once said: "First principles, Clarice: simplicity. Read Marcus Aurelius, Of each particular thing, ask: What is it in itself? What is its nature?"

The article is dealing with a foreign unregulated crypto-exchange and a US regulated stable coin.

helloworld11• 4 years ago

Love the Lecter reference...

tomkaos• 4 years ago

Funny that in the cryptoworld transaction is block because : "The banks are not open for another few hours"

alangibson• 4 years ago

Why hasn't anyone created a Non Fungible Stablecoin?

Mint NFTs that are pictures of 100 USD notes you have in a safe deposit box. Sell them for 100 USD. Make money by charging for redemptions of the specific notes you own via NFT.

aaroninsf• 4 years ago

I suppose that tiny amount of gifted top-shelf crypto I have parked, underwater, in Coinbase for the last N years is going to just evaporate, isn't it.

crypt1d2• 4 years ago

USDC withdrawals have been enabled again, but I don't suppose that's HN front-page worthy as much as the panic inducing titles.

https://twitter.com/binance/status/1602708590271385600?s=20&...

plugger2• 4 years ago

Yes, suprisingly people seem to react negatively to being frozen out of withdrawing their cash and those events are newsworthy?

crypt1d2• 4 years ago

Its a pretty big leap from "you cannot withdraw this particular stablecoin at the moment, use another one" to "you cannot withdraw your cash". Devil is in the details.

9935c101ab17a66• 4 years ago

? Withdrawals working isn’t newsworthy — that should always be the case. But when a “financial institution” in a notoriously unstable market segment prevents users from withdrawing their own funds, then of course its going to be a big story (as it should be!).

q1w2• 4 years ago

Withdrawals RESUMING after stopping is just as newsworthy.

dorkwood• 4 years ago

What about all the planes that made it to their destination? Why doesn't the news report that?

aftbit2• 4 years ago

A few thoughts from someone who has been around crypto for years:

1. Do not trust any centralized exchange. Hold your own tokens using a secure hardware wallet. Back up your seed phrase securely. This is not really that hard anymore IMO.

2. Let me repeat that, but more emphatically... Centralized exchanges are not to be trusted. They are not "crypto". They are unregulated banks operated by shady characters. Use them as on- and off-ramps from fiat, but get your tokens into a cold wallet ASAP. If you leave your money in them, they _will_ rug-pull you at some point.

3. Crypto token prices are primarily driven by speculation. Do not expect stability. Do not expect a token's price to appreciate just because the project is technically interesting, or solving a real need. Instead, expect prices to fluctuate wildly, mostly in correlation to the same macroeconomic events that impact stocks, with an even higher risk.

4. Not all stablecoins are created equally. Run away from algorithmic stablecoins IMO. Also avoid USDT and any other coins where proof of reserves seem suspicious. I personally prefer USDC. If you _must_ invest in an algo coin, look at DAI, but keep in mind that it is very exposed to USDC as well.

5. USD-pegged stablecoins can all be blacklisted and paused. If they want to do business in dollars, their makers have to accept some degree of US.gov regulation. Do not expect to hold and spend your USDC if the US government wants to stop you.

6. Do your own research, damnit. This is still early days for DeFi and digital assets, and scams are thick on the ground. Do not trust what random internet commentators say, and keep your wits about you.

7. Don't lose hope. While 95% of the economic activity in the space is either scams, fraud, or speculation, the remaining 5% consists of people trying to solve real problems that are not adequately addressed by offline cash and existing payment networks. I know HN loves to point out that crypto is a solution looking for a problem, but the truth is that the current system is not perfect, and crypto brings some much needed transparency and decentralization to the world. Crypto winter is in some ways good for this, as it will disproportionately drive away the scammers and "number go up" crowd, while the real teams will keep building.

Edit, for some specifics of my stack: I use a Ledger Nano X hardware wallet, with Ledger Live for management, Electrum (for Bitcoin), Keplr (for Cosmos ecosystem), and MetaMask (for Ethereum and other Solidity networks). I have a separate Chrome profile that has the latter two extensions installed, and only use it for DeFi crypto things. The only CeFi exchange I use is Coinbase, and I keep my balance there near $0 unless I anticipate a trade within the next 30 days. None of this is financial advice; I'm just a dude on the internet.

DebtDeflation• 4 years ago

Fun Fact - Binance is technically not headquartered in any country in the world. Originally they were based out of China, then when China banned crypto trading they moved to Japan for around a year, then got in trouble with the regulators there, left, and were trying to strike a deal with the Malta government to incorporate there, but it fell through. CZ has been saying for over a year that they will announce their new HQ location soon, but never has. They have registered subsidiaries in a few countries but at the corporate holding company level their HQ is essentially whatever hotel CZ and his laptop happen to be staying at this week.

staticautomatic• 4 years ago

That's all fine until the lawsuits start and a judge or arbitrator decides for them where their principal place of business is if they don't choose one.

AustinDev• 4 years ago

Lucky me, I just sold all my USDC yesterday. Back into old dollars for me for the time being.

Animats3• 4 years ago

It's 1220 PST. Are withdrawals still frozen?

Animats3• 4 years ago

Coindesk says that USDC withdrawals have resumed.

mikl• 4 years ago

A bit ironic that they call them “stablecoins” when they keep falling over.

sam_goody2• 4 years ago

USDN is unpegged and below $0.70 [1] I don't believe they have a chance of recovery.

USDD dipped under $0.97 (the "official peg") both yesterday and today [2]. The reserves are being poured in to keep it propped up till confidence returns. Hmmmmm...

UST (Luna/Terra) is, as is well known, finally stable ;)

In the famous thread that brought down FTX, CZ accused SBF of trying to crash Tether with a paltry $250M. While I don't see how that could be, CZ knows much more than me about what is really propping up Tether, and that is a scary thought.

And now Circle is under pressure. OK, they are big, and somewhat audited, so they probably can hold up unless a LOT of customers wanted out.

Of course, if any of these exchanges or stablecoins were honest, they would have 100% of customer's funds available or close to available, and a run wouldn't be a risk. But, let's not kid ourselves - No one in this space is honest.

I can totally imagine a crash of USDN leading to a run and crash of USDD, than a bigger run on Binance and Tether. I wonder which of those two has a larger hole?

I also wonder whether a crash of a $20bn fund could cause less scrutiny on SBF? And what would happen to BTC without Tether's magical beans to prop it up?

[1] https://coinmarketcap.com/currencies/neutrino-usd/ [2]: https://coinmarketcap.com/currencies/usdd/

pabber2• 4 years ago

I know where the bailout to cover those withdrawals came from

pabber2• 4 years ago

I know where the $ to cover those withdrawals came from,.

Check out the timing And the large transactions This wallet belongs to Bitfinex

This is bad , looks like Binance needed a bailout to cover withdrawals

https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c...

Binance freezes withdrawals of stablecoin USDC as investors pull $2B

Related Stories