Cryptocurrency exchange Binance announced on Tuesday that it has suspended USDC withdrawals during a period that it described as a “token swap”.
The process involves the exchange of one cryptocurrency for another without running it through a FIAT buffer currency first.
The withdrawals may have been prompted by fears about the exchange’s reserves, which are largely unfounded.
Binance CEO Changpeng Zhao said on Tuesday that the exchange has seen an increase in withdrawals of USDC, and this could be because investors are looking to move their currencies elsewhere.
However, Binance is in the process of converting more USDC to BUSD, the company’s own token, or PAX, another stablecoin, but this process will take a while as a yet unopened bank in New York needs to be used for the re-routing process.
Deposits remain unaffected for any currency, and withdrawals for other stablecoins such as BUSD and Tether work as intended and without any complications or restrictions.
This is also one of the first times that Binance has used “withdraw freeze” a highly criticized practice that presaged the collapse of crypto lender Celsius Network.
A similar move was attempted by FTX, the now-collapsed cryptocurrency empire of Sam Bankman-Fried who was arrested on Tuesday in the Bahamas.
Binance currently holds $60bn worth of assets on its platform, but between Monday and Tuesday, the company saw $1.6bn worth of withdrawals, according to crypto data company Nansen.
Withdrawals usually signal lack of trust in crypto, which is understandable after FTX went belly up due to poor management of consumer funds.
Binance may also be targeted by an investigation launched by the US Department of Justice which could lead to legal action.
Binance has not commented on this, nor has it felt the need to calm investors about the temporary withdrawal freeze, stating matter-of-factly that it was a routine procedure.