The CEO of CryptoQuant assessed the likelihood of a global crisis in the crypto industry amid the problems of the KuCoin cryptocurrency exchange. He compared this situation with the collapse of FTX and explained why KuCoin does not face the same prospect.
Recall that the US Department of Justice (DoJ) accused the Kucoin cryptocurrency exchange of violating the Bank Secrecy Act and anti-money laundering laws, after which users began to urgently withdraw funds from the platform, fearing a decrease in asset liquidity.
Ki Young Ju, head of CryptoQuant, said that KuCoin has sufficient reserves to ensure user withdrawals. KuCoin's reserves are robust, especially in Bitcoin (BTC) and Ethereum (ETH). Even the significantly increased number of withdrawal requests triggered by the panic of the exchange's retail clients will not cause problems for KuCoin's reserves.
KuCoin quickly took steps to reassure its users and emphasize the safety of their assets. The crypto exchange's management stated that despite the investigation, users' funds are not at risk and are safe, informs CoinGape.
KuCoin also emphasized its commitment to assist in the investigation of the allegation to prove its commitment to transparency and accountability. According to the exchange's statement, large-scale withdrawals will not be a problem, but will have a minor impact on the overall reserve.
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The head of CryptoQuant shares the same opinion, as KuCoin does not pool client funds, unlike FTX's practice. Ki Young Ju also compared the reserves of KuCoin and FTX and found significant discrepancies. FTX's reserves were close to zero, while KuCoin's reserves appeared to be stable.
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The main problem with FTX was the mixing of user funds with company funds. FTX's charts clearly showed massive deposits and withdrawals, indicating a lack of transparency and non-compliance with legal financial practices. However, KuCoin turned out to have over 100,000 ETH and over 7,000 BTC, ensuring seamless withdrawals.
It is worth noting that the KuCoin exchange faced a significant outflow of funds, about $1.2 billion per day, according to the analytics platform SpotOnChain. A significant amount, about $500 million, was withdrawn from KuCoin Ethereum wallets after the accusations of the US authorities. At the same time, KuCoin still retains a significant reserve: assets worth more than $3.6 billion on the Ethereum network.
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