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Binance.US suspends U.S. dollar deposits

Binance.US says it is suspending taking U.S. dollar deposits and warning customers that they could halt USD withdrawals as early as June 13th. It comes after the SEC brought litigation against the crypto exchange. Yahoo Finance crypto reporter David Hollerith breaks down how the crypto industry is reacting.

Video Transcript

[MUSIC PLAYING]

AKIKO FUJITA: Crypto exchange Binance has indefinitely paused all American deposits and given customers until Tuesday to withdraw any dollars. That comes on the heels of the SEC's lawsuit against the company and its founder. Yahoo Finance's David Hollerith has been following the story for us. David, I'm looking at some of the price action today in largest crypto assets. Not a whole lot of swings here, but it's got to make a lot of users a little nervous right now.

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DAVID HOLLERITH: Right, yeah, Akiko, this move by Binance US, one way to interpret it is it's a signal that its banking partners have dropped the company. The company said they're moving to be a crypto-only exchange. In the latest in the case the SEC is undergoing with them, has a hearing set for Monday afternoon. And in it, a judge is going to weigh whether or not to take the SEC's motion to place a restraining order on Binance US's assets. And as part of that, it also means preserving the documents, their internal documents that are part of Binance and Binance US.

So we'll wait to see that, but that's obviously a bit of a bigger deal. And when you see these banking partners cut off a company like that, it obviously severely limits liquidity. For Coinbase, it's nothing quite as pressing in the case right now. It's a little bit slower moving just in terms of the first week. CEO Armstrong did say on Wednesday that it's business as usual, but it's still worth pointing out that Moody's changed their outlook for Coinbase yesterday afternoon. And they were citing essentially uncertainty. And for the two companies, crypto's two largest companies, uncertainty is like the main thing that everyone is concerned about.

The Binance case has a little bit-- has several more issues. But I think, in general, it just kind of hangs a worse backdrop in terms of what it means for US investors in the space. But that being said, people have pointed out that Coinbase is in a scenario where they could present arguments that they have a potential chance. With Binance, it looks a little bit more dicey. All this to say, though, that we have been paying attention to the net flows or net transfers going in and out of both companies, or both exchanges. And those have slowed. They've tapered off in the last 24 hours.

And for the last seven days, so what we can assume is like the whole seven-day period since the lawsuits came out, Binance and Coinbase both look fairly sound in terms of what the outflows are. And the reason why we look at this is, obviously, with FTX, after bad news happened in November and people started to question FTX's balance sheet, we started to see sort of a crypto bank crime.

And we've definitely seen higher outflows, $2.4 billion in net flows for Binance and $1.9 billion in net flows, both negative numbers, for Coinbase in the last seven days. So those are still large numbers, but it's nothing like we've seen at FTX. So at least, in the short-term, it seems like investors are not as panicked here. In the long-term, obviously, huge backdrop of uncertainty in terms of what's going to happen with these lawsuits the SEC has filed.

AKIKO FUJITA: Yeah, uncertainty is still the big word within this space. David Hollerith, as always, appreciate that time.