KuCoin Faces Market Share Plunge Amid US Regulatory Woes

April 03, 2024

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KuCoin market share has experienced a huge dip and an outflow of funds up to $1.2 billion in the wake of the legal troubles it had with the U.S. Department of Justice (DOJ) and Commodity Futures Trading Commission (CFTC) last week.

Legal Troubles Results in KuCoin Dip

According to a report from blockchain research firm Kaiko, KuCoin’s market share by daily trading volume has nosedived by half following charges from both the U.S. DOJ and the CFTC. The daily trade volume crashed from $2 billion to $520 million after the charges were announced on March 26.

The charges against KuCoin include allegations of violating anti-money laundering (AML) laws and illegal operation of a digital asset derivatives exchange. This triggered users to engage in massive withdrawals of their tokens from the platform.

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In an attempt to stem the withdrawal tide, KuCoin initiated an airdrop program which however failed to prevent the market share decline, which dropped from 6.5% to 3%.

Withdrawal Surge Hits KuCoin

Following the March 26 announcement, $600 million was withdrawn with the total outflows from KuCoin-labeled wallets surpassing $1.2 billion. The massive dip amid the exchange resulted in the majority of outflows to other platforms such as ether and USDT. The users migrated funds to perceived safer options such as Coinbase, Binance, and OKX, as well as self-custodial wallets.

The DOJ had accused KuCoin of facilitating money laundering activities totaling over $9 billion and circumventing U.S. AML and know-your-customer (KYC) regulations. Although KuCoin claimed to have complied with regulations and the safety of user assets, the charges have cast a shadow over its reputation in the crypto space.

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Also, the CFTC filed a civil action against KuCoin, seeking disgorgement, penalties, and trading bans for allegedly operating an illegal derivatives exchange.

Analyst Sees no Link with Tornado Cash

Although Kaiko’s analysis found no direct interaction between KuCoin and Tornado Cash, a crypto mixer on the Ethereum blockchain noted that funds stolen from KuCoin’s $280 million hack in 2020 were “privatized” using the mixer, involving a significant amount of ether.

According to the analyst, “Although Kucoin managed to keep its market share relatively stable throughout last year’s bear market, the recent charges and outflows may pose a significant challenge to the exchange’s future growth.”