• Binance lost 16% of its global trading volume in Q1 2023 due to regulatory pressure.
• The net stablecoin outflow reached -$295 million/day, which was the largest ever outflow witnessed by the exchange.
• The primary reason behind the record outflows was the drastic increase in redemptions of Binance USD (BUSD).
Binance’s Loss of Trading Volume
Binance lost a sizable chunk of the global market share in the first quarter of 2023, as regulatory bodies tightened their chokehold around the world’s largest cryptocurrency exchange. As per a report by crypto market data provider Kaiko, the crypto behemoth lost 16% share of global trading volume after the U.S. Commodity Futures Trading Commission (CFTC) accused it of violating certain compliance rules to expand its operations. The lawsuit-induced FUD thus, resulted in a radical shake-up of its exchange reserves with users withdrawing funds for self-custody.
Record Stablecoin Outflows
As per a report by on-chain analytics firm Glassnode, recent stablecoin outflows outpaced inflows. This indicated that a larger number of stablecoins were withdrawn from Binance than deposited into it. With Binance firmly in the cross-hairs of US regulators, there was an investigation into how these changes affected net flow and supply dynamics on Bitcoin and other cryptocurrencies. Net flow analysis showed that daily outflows reached -$295 million/day at one point, which was reportedly the largest net outflow ever witnessed on this platform.
Redemption Increase: BUSD
The primary reason behind this record exodus appears to have been Paxos halting issuance for their stablecoin; BUSD in February 2023. This created shockwaves throughout markets as we saw a notable decline in balance for what had previously been one of the most popular stablecoins on Binance exchange from $21 billion to just $6 billion at press time .
Status Of The BNB Chain
At press time, data from DeFiLlama suggested that market cap for stablecoins on BNB Chain [BNB] stood at $6.42 billion—a significant drop from last month’s reported figure which sat close to $7 billion .
Conclusion
As one can see, regulatory pressure has had an immediate impact on trading volumes and user confidence within this space – especially with regards to major exchanges like Binance who have seen dramatic losses since news broke about potential violations earlier this year .