The popularly used interface for a cryptocurrency exchange is raising concerns among investors and other people likely to be affected by its operations. Binance doesn’t have any physical or definite headquarters where people may go to seek help with their complaints. The issue came into the vicinity post the Bitcoin rates crash in May 2021.
When Binance Froze, It Affected Investors Around The Globe
Referring to a Wall Street Journal, the article brought into view a case study of an individual called Anand Singhal, who had saved funds worth $5000, to fulfill his dreams and pay for his foreign tuition fees. This particular individual has been saving up by earning from freelance coding and investment from the age of 13, from his bedroom in New Delhi, India. He said, “ all his money vanished in 7 minutes on May 19, 2021”.
The bitcoin candlestick chart being observed will show the massive uncertainty caused in the rates within a few months. Binance platform for cryptocurrency exchange “temporarily suspended” the operation of withdrawal of assets from their account. “ it is not uncommon for exchanges to have downtime or freeze withdrawals at times of hot market activity. But since at least late 2020 Binance users from the US and around the globe have had their accounts frozen for unconventional reasons.” stated Coindesk.
This problem is not a new one, Binance has been freezing user accounts for a long time now. If you enter the term “Binance freeze”, the search URL will end up showcasing such problems dating to a year ago. Users put their money and keep their cryptocurrency profile there, but many times, when it comes to withdrawal of the funds the application “locks out” the users. The most recent case, which brought up this issue, was in May 2021. When the bitcoin rates were crashing drastically (as a result of countries cracking down the activities of cryptocurrency investment and mining, the highlight of environmental hazards caused by the heavy power-driven computational wares required for mining, the tweets by industrialist Elon Musk). Bitcoin rates fell from a peak of $60,000 (an eight-fold increase in 12 months) to a low of below (half the value) $20,000 within a few weeks. (currently, the price of bitcoin is at $33,046).
When the prices fell consistently, investors and crypto holders naturally wanted to sell off their coins to avoid losses as much as possible. But Binance froze at such a crucial time, allowing an incur of massive losses for many investors. It is no big deal for long-term bulls in the market, but people like Mr. Singhal faced losses beyond repair. He even lost the initial money he put up for investment.
Mr. Singhal and others were locked out of their accounts, they have been trying to get their money back. However, unlike other institutions a cryptocurrency exchange platform like Binance is heavily unregulated just like the cryptocurrency market itself, figuring out whom to report this complaint and seek a result. Two groups are working and preparing lawsuits to sue Binance. The WSJ states, “Mr. Singhal has joined a group of about 700 traders who are working with a lawyer in France to recoup their losses. In Italy, another group is petitioning Binance over the same issue. Lawyers representing the Italy group sent a letter to 11 Binance addresses they could find in Europe, and an email to the help desk.”
One of the spokesmen working in Binance said,” extreme market volatility, like on May 19, can create technical bottlenecks for it and other exchanges”. The spokesperson later added, “We took immediate steps to engage with users affected by the outage,” and to provide compensation, the spokesman said. He added that “we remain happy to speak to anyone who reaches out to us with a concern about the outage.”
Soon after a tweet was released addressing that they have been working on their compliance program of the application and they would be happy to help and compensate anyone who suffered due to their system outage, provided screenshots from traders. However, this tweet was soon removed. The CEO of the Binance reached out to Mr. Singhal to establish a truce. The latter was being apologized to and was offered a 3-month free subscription to the VIP version of Binance Exchange ltd in return Mr. Singhal lets the matter forego. It amused the victim of monetary loss and said in an interview, “ I will never trade again, I am traumatized.”
From the various regulatory issues, and the heated phase of global fund politics, Binance has raised a question of doubt and uncertainty. Is it trustable?