Binance is the major industry leader in terms of trading volume but seems to be running into some issues right now. Users already withdrew billions in funds from the exchange platform this week amid concerns about Binance's Proof-of-Reserves report and possible criminal prosecution by the US Department of Justice.

What is going on?

Last week, Binance published a so-called Proof-of-Reserves. A Proof-of-Reserves is a check of the exchange's reserves carried out by the South African company Mazars Veritas. At first glance, everything seems fine, and according to Mazars, the exchange has at least enough Bitcoin to cover customers' balances.

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However, some experts have dug into Mazars' report and are concerned based on that. It seems that the scrutiny of Binance's books was paper thin and that Mazars only got some superficial data from the exchange. Normally, a party like Mazars really should go through all the finances itself.

That didn't happen here, leaving Mazars to rely on some data it got from Binance itself. That makes the Proof-of-Reserves of the exchange not very reliable and as a result many people now choose eggs for their money and remove their crypto from the exchange.

Prosecution

Furthermore, the US Department of Justice has doubts about starting a criminal prosecution of the exchange and, among others, its CEO Changpeng Zhao. According to some officials of the ministry, there is enough evidence to act aggressively against Binance. Others want to wait and collect more evidence.

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This development also does not contribute to public confidence in Binance. No one knows how the stock exchange's corporate structure works. Binance is a relatively opaque company and that is not helping the stock market right now. Binance CEO Changpeng Zhao asks his followers on Twitter to ignore the negative rumors. The question is to what extent people listen to him because confidence in the industry is not high at the moment.

People take away credits

In recent days, customers have withdrawn billions in assets from Binance. If we are to believe Nansen's Andrew Thurman, this is a net outflow of USD 3 billion. “Binance faced a net outflow of $3 billion over a 24-hour period,” Thurman told CNBC. Please note that this is a net outflow. This means that withdrawals in that 24-hour span exceeded deposits by over $3 billion.

So we are dealing with a real exodus at the largest stock exchange in the world. That does not alter the fact that Binance should be safe in itself, because according to the exchange platform it has over $ 60 billion in assets under management. The next few days will tell us if that is indeed the case and Binance is the sound company it claims to be.

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For the industry, it is to be hoped that Binance will survive, because if they too collapse, then confidence will be lost completely. Then it could take years before the general public dares to invest again and that would give the adoption of Bitcoin a serious blow.