Binance, the world’s largest cryptocurrency exchange by trading volume, earlier today, on March 24, temporarily halted spot trading due to a matching engine glitch that disrupted the platform.
Bug Detected, Withdrawal And Depositing Halted
The CEO of Binance, Changpeng Zhao, popularly known as “CZ,” said they detected a bug during an analysis of a trailing stop order recovery. As a result, the exchange temporarily had to pause deposits and withdrawals, saying the decision was also part of their standard operating procedure (SOP).
Initial analysis indicates matching engine encountered a bug on a trailing stop order (a weird one). Recovering. Est 30-120 min ish. Waiting for more precise ETA.
Deposits & withdrawals are paused as a SOP (standard operating procedure). Funds are #SAFU. https://t.co/mvtGQ3JlMA
— CZ Binance (@cz_binance) March 24, 2023
Crypto spot traders buy or sell assets without using leverage positions. That means users can directly swap crypto or fiat for other crypto assets and vice versa. Spot trading is distinct from derivatives trading, where traders can open Bitcoin or BNB positions, for example, using leverage or borrowing money from the exchange for a bigger risk.
In response to an inquiry about halting withdrawals, CZ stated that the state of orders in the matching engine directly affects funds available for withdrawal in user accounts because the logic checks with the matching engine as a security procedure before processing withdrawals.
After identifying the issue with Engine 1, Binance restarted it. However, the reconciliations and engine sync-ups would require time, as the bug occurred 57 minutes after the hourly snapshots.
The Binance CEO further noted that the platform had achieved 100% uptime in 2022. In the future, the Binance team will run pre-trading tests. Even so, depositing would be enabled, followed by internal transfers, then a 30 min “cancel-only period” would be permitted. Afterward, crypto trading would resume.
Est 60 min ish ETA. Our team’s doing pre-trading tests now. For those new with us, our resume SOP is roughly as follows:
Announcement with exact times (soon).
Deposit enabled (done now).
Internal transfers enabled (done now).
30 min of cancel-only mode (not yet)
Resume trading… https://t.co/ZtkhTkD1CD— CZ Binance (@cz_binance) March 24, 2023
Binance Stress Test
Binance is no stranger to the uncertainty triggered by such a situation.
In December 2022, Binance saw massive withdrawals of USDC, which CZ called a “stress test.” The “stress test” came amid growing concerns about its reserves when investors were already wary of centralized exchanges due to the swift collapse of FTX.
However, while billions were shifted from the exchange in days, Binance remains one of the most capitalized and continues to meet withdrawal requests.
We saw some withdrawals today (net $1.14b ish). We have seen this before. Some days we have net withdrawals; some days we have net deposits. Business as usual for us.
I actually think it is a good idea to “stress test withdrawals” on each CEX on a rotating basis.
1/2 https://t.co/uF9lLPDSyS
— CZ Binance (@cz_binance) December 13, 2022
This is also not the first time Binance is halting coin withdrawals. After the Silicon Valley Bank (SVB) bank run, Binance temporarily halted withdrawals in stablecoin USDC. The exchange said this was because the swap between the Paxos-issued Binance USD stablecoin and USDC needed US banks to be open.
Binance has temporarily suspended auto-conversion of USDC to BUSD due to current market conditions, specifically related to high inflows & the increasing burden to support the conversion.
This is a normal risk-management procedural step to take while we monitor the situation.
— Binance (@binance) March 11, 2023
Paxos, the issuer of BUSD stablecoin, was ordered by the New York Department of Financial Services (NYDFS), not to mint new tokens.
Paxos Trust continues to manage BUSD dollar reserves. It maintains that BUSD will always be backed 1:1 with US dollar-denominated reserves, fully segregated and held in bankruptcy remote accounts.
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