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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).  

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.

BNB Price On March 24| Source: BNBUSDT On Binance, TradingView

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.

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.

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.

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.

Feature Image From Canva, Chart From TradingView

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