Binance temporarily suspends LUNA, UST withdrawals citing network congestion

As the crypto community still tries to decipher Terra’s ongoing pegging-depegging fiasco in relation to its stablecoin offering TerraUSD (UST), major crypto exchange Binance temporarily suspended the withdrawals for LUNA and UST on Tuesday. 

The market value of UST, Terra’s stablecoin offering, recently fell below the expected $1.00 price point as LUNA’s price witnessed a sharp decline owing to a major selloff. At the same time, the BTC/UST trading pair on Binance reached highs of more than $42,000, while other Bitcoin dollar markets struggled to preserve $30,000, as reported by Cointelegraph.

Which has caused a massive surge in BTCUST (Not Bitcoin valued in dollars, but valued in the UST stablecoin). pic.twitter.com/Xn7qcy4VMZ

— Blockchain Backer (@BCBacker) May 10, 2022

As a reactionary measure against the ongoing uncertainty within the Terra ecosystem, Binance suspended all withdrawals for LUNA and UST tokens for six hours (between midnight to 6:00 AM EST), citing a high volume of pending withdrawal transactions. 

Withdrawals for $LUNA and $UST on the Terra network have now resumed on Binance.We will continue to monitor the network conditions and provide further updates here if required.

— Binance (@binance) May 10, 2022

According to Binance, the high volume of pending UST transactions is due to network slowness and congestion. While acknowledging the possible inconvenience to its investors, Binance stated:

“Binance will reopen withdrawals for these tokens once we deem the network to be stable and the volume of pending withdrawals has reduced. We will not notify users in a further announcement.”

Crypto Twitter, however, reacted to Binance’s announcement by questioning the inherent values of decentralization that the crypto community stands for — comparing the move to a centralized approach usually sported by traditional finance.

Hmm... reminds me a lot of our shitty legacy financial system. https://t.co/yF11hj4i5N

— Ergo Whale (@ergo_whale) May 10, 2022

As users across the globe get barred from withdrawing their own funds, the community reiterated the phrase “not your keys not your coins,” and highlighted Binance’s funds’ suspension as one of the major cons of a centralized crypto exchange. 

On the other hand, some members of the community supported the move by stating that Binance CEO Changpeng “CZ” Zhao helped many investors from liquidating themselves by selling a stablecoin at $0.70.

While Terra continues to find a permanent solution to the dropping value of UST, numerous crypto entrepreneurs including Polygon co-founder Sandeep Nailwal showed support for the co-founder and CEO of Terraform Labs, Do Kwon.

I have not followed LUNA/UST ecosystem or community discourse much BUT at a founder to founder level, I can feel for @stablekwonHe is at the epicentre of this industry wide event, handling so much pressure & responsibility at such a young age.Good luck to him & Luna community!

— Sandeep - Use Stripe on Polygon (@sandeepnailwal) May 10, 2022

Related: Terra’s UST flips BUSD to become third-largest stablecoin

On April 18, UST flipped Binance USD (BUSD) to become the third-largest stablecoin on the market after Tether (USDT) and USD Coin (USDC) based on market capitalization.

Cointelegraph’s report based on data collected from CoinGecko showed that UST’s total market capitalization had surged 15% over the past 30 days to sit at roughly $17.5 billion, which was slightly higher than BUSD’s market cap of $17.46 billion.

However, the recent turbulence across the Terra ecosystem has resulted in BUSD regaining its position as the 9th-largest cryptocurrency in terms of market capitalization. At the time of writing, UST maintains 10th position in the list with roughly $16.5 billion in market cap.