Binance, the world’s largest crypto exchange, suspended trading all digital tokens for more than two hours on Friday after a software glitch hit its main systems.
Shortly after the outage occurred on Friday, chief executive Changpeng Zhao said Binance had traced the issue to a bug in its so-called matching engine, where customers’ buy and sell orders are processed.
The exchange also prevented customers from depositing and withdrawing funds but said the move was “standard operating procedure”.
Technical issues and outages are relatively commonplace in crypto. However, a halt in spot trading on the largest crypto exchange risks a far greater problem for a market heavily reliant on Binance as a trading shop.
Binance has cemented its hold on the world’s crypto trading markets since the collapse of rival exchange FTX in November. At the start of the month, CryptoCompare figures showed that Binance controlled more than 60 per cent of the crypto spot market.
A former employee, who worked in risk and compliance at the global exchange, said halting withdrawals was “definitely not standard procedure”.
“From a risk perspective, [halting withdrawals] is serious,” the employee added.
According to data provider CryptoCompare, Binance stopped trading at 11.27am London time. The service was down for over two hours until it came back online at 2.00pm. The exchange did not immediately provide further comment.
Full outages of spot trading are rare. In 2018, the year after it was founded, Binance halted trading and customer withdrawals of funds after what it described as a “significant increase in users and trading activity”.
The company has come under increasing scrutiny from financial regulators as its importance to the market has grown.
Last month, a Binance-branded stablecoin — a kind of crypto token designed to track the dollar — came under fire from New York regulators, which halted further issuance of the coin. By the end of February, investors had pulled more than $6bn out of the token, in a sign that New York’s crackdown on the stablecoin was putting pressure on the exchange.
More recently, American regulators have taken aim at Binance over its alleged links to illicit activity. FinCEN, a financial crime watchdog, named the exchange as a counterparty to Bitzlato, a crypto exchange whose founder was charged with transmitting more than $700mn in illicit cryptocurrency funds that fell foul of US money laundering regulations.
The exchange has also come under scrutiny from regulators around the world, including the UK’s Financial Conduct Authority, which said in 2021 that Binance was not capable of being effectively regulated after the company failed to provide basic information.