The Decline of User Assets on KuCoin Due to Legal Challenges

The Decline of User Assets on KuCoin Due to Legal Challenges

KuCoin has recently faced legal challenges with US authorities, leading to a significant decline in user assets on the exchange. The latest proof-of-reserve certificate revealed that users’ Bitcoin holdings decreased by 25.4% to 12,114 BTC in March, with Ethereum balances plummeting by approximately 22% to around 112,000 ETH. Similarly, the amount of Tether’s USDT held by users on the exchange dropped by about 22% to 963 million USDT tokens.

Data from DeFiLlama further supports the downtrend, showing that over $843 million worth of digital assets were withdrawn from the platform during the past week. This resulted in KuCoin’s balance decreasing to $3.2 billion from over $4.3 billion recorded as of March 26. Despite these declines and outflows, the exchange’s proof-of-reserves certificate indicates that the firm has fully backed assets within its system.

KuCoin’s recent challenges can be traced back to back-to-back lawsuits from US authorities, including the US Department of Justice and the Commodity and Futures Trading Commission (CFTC). These allegations accused the platform of violating anti-money laundering regulations with its unregistered operations in the country. Concurrently, KuCoin’s market share and trading volume have significantly declined, with daily trading volume dropping to around $520 million from approximately $2 billion.

In response to the legal battles and declining market share, KuCoin users have transferred their assets to rival centralized exchanges like Coinbase, Binance, and OKX. Market makers have also left the exchange, contributing to the outflows. Some users have opted to send their funds directly to their on-chain wallets, further impacting KuCoin’s asset holdings.

Despite the challenges, KuCoin’s CEO Johnny Lyu has emphasized the exchange’s compliance efforts and stated that legal battles are not unique in the industry. The exchange has also announced plans for a special $8.9 million airdrop of its KCS native token and Bitcoin to compensate users who experienced withdrawal delays between March 26 and 28. This airdrop is designed to maintain user trust and satisfaction, with loyal users expected to receive additional rewards.

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