Binance temporarily closes LUNA and UST withdrawals citing network congestion

On Tuesday, leading crypto exchange Binance briefly banned withdrawals for LUNA and UST as the crypto community continues to try to figure out Terra’s continuing pegging-de-pegging crisis in regard to its stablecoin offering TerraUSD (UST).

Withdrawals on Terra Network $LUNA temporarily suspended.https://t.co/hIGrAEzOwD

— Binance (@binance) May 10, 2022

As TheCoinRise reported, the LUNA price plummeted sharply due to a large selloff, resulting in a major slip in the value of Terra’s stablecoin UST, which went below the predicted $1.00 price point. The BTC/UST trading pair on Binance achieved highs of over $42,000, while other Bitcoin dollar markets battled to maintain $30,000.

Binance stopped all withdrawals for LUNA and UST tokens for six hours (between midnight and 6:00 AM EST) as a reaction to the growing uncertainty in the Terra ecosystem, noting a high volume of pending withdrawal transactions.

Notably, Terraform Labs CEO and co-founder Do Kwon admitted that one could see a negative impact n the stability of UST if Bitcoin crashes.

Binance cited network slowness and traffic as a key factor

The huge volume of pending UST transactions, according to Binance, is due to network latency and traffic. Binance recognized the potential for investor annoyance and 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.”

However, the crypto Twitter community reacted to the exchange’s announcement by challenging its intrinsic ideals of decentralization, equating the move to the centralized approach used by traditional banking.

As customers around the world are unable to withdraw their own assets, the community has reaffirmed the phrase “not your keys, not your coins” and cited the suspension of Binance’s funds as one of the primary disadvantages of a centralized crypto exchange.

Some crypto community members, on the other side, defended the move, claiming that Binance CEO Changpeng Zhao saved many investors from liquidation by selling a stablecoin at $0.70.

While Terra works to find a long-term solution to the UST’s declining value, many crypto entrepreneurs, like Polygon co-founder Sandeep Nailwal, have expressed support for Do Kwon.

I have not followed LUNA/UST ecosystem or community discourse much BUT at a founder to founder level, I can feel for @stablekwon

He 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 AggLayer. polygon 💜 (@sandeepnailwal) May 10, 2022