No fan of Binance but it's a reasonable explanation and submitter has given no reason to think it is not, indeed, a temporary situation, as has happened many times in the past without particular note.
1. They are not prepared at all for a "bank run"
2. USDC on the exchange are not backed by real USDC. Therefor they need to market buy them.
3. CZ is telling people to withdraw using BUSD and USDT, both more or less Binance controlled stables that are much harder to convert into real USD.
It would be extremely wise to exit Binance and Binance related coins such as BNB, BUSD and Tether.
Indeed, but the great ponzi scheme rolls on none the less :/
Nobody is prepared for a bank run, that would be idiotic. It would mean storing strictly only liquid assets.
> USDC on the exchange are not backed by real USDC. Therefor they need to market buy them.
That's pure speculation on your side... Withdrawal pauses have happened many times in the past, it's not really alarming. Only when something bad happens afterward do people remember there was a withdrawal pause before, but there has been countless pauses before with no problem afterward.
> Binance and Binance related coins such as BNB, BUSD and Tether.
What...
Most banks pause withdrawals every night. They are only open during the day. You can't just show up at 2 am and be able to withdraw 10 million dollars.
It is not like Binace is limiting cash withdrawls, they a halting wire trabsfers. For me that's a dead sign the money isn't there anymore.
Which is what is happening to Binance.
Binance has a bank teller, but he's telling you "uh hold on we need to buy your money from another teller that's sleeping because we don't actually have it. Do you want to get our monopoly money instead?"
Binance is about to pull the rug.
Disclaimer: not defending Binance, not into crypto, just a note.
As soon as a bank fails to provide audited balance sheets, authoroties can step in and halt operations. Mainly to make sure customers deposits are still there and can be withdrawn by the legal owners. It is almost hilarious how Crypto is relearning, at a redicioulous pace, all the lessons tradotional finance and banks learned over the last 100 odd years. And still fails to see that all the answers are already there. In a sense, it is almost peak start-up cliche disruption. Can almost be a good thing so.
Now I challenge you to find any broker on the planet that can promise instant FX swap settlement on the same day for a cash account.
Don't compare apples and bananas.
And show me one broker that refused, regardless of transaction fees or other contractual stuff, customer wothdraels of funds. Other than those brokers that actually "lost" customer funds. Which is, by the way, also fraud.
You don't get to define what is a bank, and "anyone holding my money" is definitely far from the definition of a bank.
USDC is _not_ USD. When you deposit 100 USDC to Binance and ask to withdraw USD, you are effectively making an FX swap between two currencies, even if these currencies are 1:1 pegged.
Again, there is simply no broker on the planet that will do that instantaneously. USD is 1 day settlement, you just won't get any better than that, unless the broker accepts to take the counterparty risk of paying you upfront. No existing broker will do that for any substantial amount.
Don't compare apples and bananas.
If I deposit Shmollars to a regulated brokerage they will hold my Shmollars in Shmollar denominated account and upon request will instantly (subject to technicalities of the transfer) transfer those Shmollars back. No FX swap needed.
Now if they convert those Shmollars to anything else without my explicit request then they are no longer a brokerage and more comparable to an unregulated bank. Which is what Binance apparently did.
ATMs at my bank in Germany were down because of a strike.
If a crypto exchange just disables withdrawals of one asset, users technically still can sell it for BTC, ETH or another stablecoin and withdraw that.
Sometimes my banking website is down for maintenance.
It's an exchange. Your money should be 100% liquid. Everyone should be prepared for a bank run. Unless they're just as dodgy as FTX and using everyone else's money for shenanigans.
I don't know why people are defending this as if it is a good thing.
No single broker on the planet is instantly liquid. At the very best daily liquid.
Most currency settlements are between 1 and 3 days for DM. Your "feeling" of instantaneous transfers is just front office display, the real back office takes days.
I don't know how else to say it, your buying power is not their buying power just because they have it on deposit and you trusted them.
That's the thing we trusted them not to do, and that's how exchanges like FTX lose the trust of their customers. If you think this is just the cost of doing business, you're a fool.
Crypto currencies do not take days to move from point a to point b. That is old world baggage.
Binance is a broker, not a bank. A bank run on a broker simply shouldn't be possible. A broker is supposed to hold whatever the customers want to hold on their behalf (in so-called segregated accounts, so that the assets belong to the users, even if the broker should go bankrupt). If the users want to withdraw, you just give them whatever you were holding on their behalf.
A broker is not supposed to invest users' funds into something else. If you're acting honestly as a broker, there can't be a mismatch between users' deposits and their assets. Don't fall for this nonsense touted by SBF, the problem is that they are acting dishonestly (and cluelessly, it seems), not that there was any sort of unfortunate liquidity crisis or whatever.
What do you mean by liquid? USDC is an ERC-20 token on Ethereum. 'Holding' it means having the private key to a wallet that has been credited with a positive balance in the smart contract. Transferring it is as easy as calling the transfer(address to, uint amount) function from that wallet - you'll have to charge the user for the transaction fee, but that's fair game. According to CZ's tweet, they don't actually hold USDC on behalf of the users, but they try to buy them on the market when users request withdrawals, which is simply not how a broker is supposed to act, and a recipe for disaster. Stop defending this practice.
Really? If Vanguard had to transfer all of my cash and all of my ETF holdings to directly and everyone elses too I would expect that to be zero hassle for them bar the likely collapse of their future business.
Every legitimate exchange is prepared for a “bank run”. because they don’t behave like banks since they’re exchanges.
Being exchanges, they have your money in exactly the form that shows up in your account.
Binance (and FTX before that) apparently doesnt, because it’s behaving like a bank and lending out your money despite claiming to be an exchange and not a bank.
No bank is prepared for a bank run. It's not supposed to be a bank. Banks make money by using customer deposits to generate revenue through loans. Exchanges make money through fees and aren't supposed to be using customer deposits at all.
Likely, USDC balances are backed by dollars in the bank account mentioned in the tweet. To convert that to USDC, they don't need to market buy it - they can wire it to Circle to get fresh USDC minted. In contrast with having all USDC always on hand (like they probably should), this lets Binance earn interest from the bank for their customer deposits.
Or they could be insolvent, sure. There's really no way to reliably tell.
"Stablecoins: processing. Banks are closed for the weekend, though; USD <> stablecoin creations/redemptions might be slower until wires clear tomorrow, especially for some coins/chains."
This post seems like a fair summation to me -- far too kind, actually, if we want to be frank.
Coming to a court room soon :)
If the entire thing collapses we won't even be able to take credit since it was put in motion by CZ himself.