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Will Binance face a bank run?
Is the $4.3 billion settlement pressure too much for Binance?
Can Binance still be used with peace of mind?
According to data from DeFillama, the outflow of funds from Binance exchange in the past 24 hours is about $800 million, although this number is the largest among all exchanges, in fact, with a total asset size of $67 billion, $800 million is not a risk for Binance. Moreover, if there is no serious outflow of funds on the first day of the incident, the probability of a panic bank run occurring later will naturally not be too high.
Charles Edwards, CEO of cryptocurrency quant trading firm Capriole Investments, cited a report from Fortune magazine stating that Binance’s revenue over the past three years was approximately $30 billion, with a profit margin of around 30%. In other words, Binance has earned about $9 billion net profit in the past three years, with sufficient capability to pay this hefty $4.3 billion settlement.
On the other hand, user X @jconorgrogan also analyzed the company’s asset holdings in the Proof of Reserves (PoR) of Binance. The results show that Binance’s total on-chain assets are $6.35 billion, of which $3.19 billion are stablecoins (only on-chain assets are included, excluding off-chain assets outside PoR). @jconorgrogan speculates that Binance may have sufficient capability to pay this $4.3 billion settlement without selling cryptocurrency assets.
Although the criminal investigation involving Binance has caused quite a stir, even leading figure Zhao Changpeng stepped down as a result, users need to note that the entire investigation revolves around “Binance violating U.S. anti-money laundering and sanctions laws,” similar to the money laundering scandal that occurred in the past with Hong Kong’s HSBC Bank, which ultimately ended with HSBC Bank paying $1.9 billion to the U.S. government to settle.
DOJ, FINCEN, and other law enforcement agencies have not accused Binance of embezzling customer assets or other illegal activities, thus having a fundamental difference from FTX, and this is also why there has been no panic bank run based on on-chain data.
However, it should be emphasized that the lawsuit by the U.S. Securities and Exchange Commission (SEC) against Binance is not included in the scope of the settlement agreement (as SEC’s lawsuit is civil, not criminal), and like Ripple, the lawsuit against SEC will take years to resolve through legal battles.