KuCoin, a prominent cryptocurrency exchange, has recently faced legal challenges with US authorities, leading to a noticeable decrease in user assets on the platform. A proof-of-reserve certificate released by the exchange highlighted the sharp decline in user holdings, with Bitcoin balances dropping by 25.4% to 12,114 BTC in March. Similarly, Ethereum balances saw a decrease of approximately 22%, amounting to around 112,000 ETH. The amount of Tether’s USDT held by users on KuCoin also experienced a decline of about 22% to 963 million USDT tokens. Data from DeFiLlama further supported this downtrend, with over $843 million worth of digital assets being withdrawn from the platform in the past week. As a result, KuCoin’s balance decreased from over $4.3 billion to $3.2 billion since March 26.
Impact of Legal Issues on KuCoin’s Market Share and Trading Volume
The legal challenges faced by KuCoin from US authorities, including the Department of Justice and the CFTC, have had significant repercussions on the exchange’s market share and trading volume. According to Kaiko data, KuCoin’s daily trading volume plummeted to around $520 million from approximately $2 billion. The exchange’s market share also dropped from about 6.5% to less than 3%. Kaiko reported that users transferred their assets to rival centralized exchanges such as Coinbase, Binance, and OKX. Market makers leaving the exchange also contributed to the outflows. Additionally, some users opted to send their funds directly to their on-chain wallets, further reducing KuCoin’s user assets.
KuCoin’s Response to Legal Battles and User Asset Reduction
Despite the legal challenges and asset outflows, KuCoin has maintained that it has fully backed assets within its system, as evidenced by its proof-of-reserves certificate. The collateralization of the tokens ranged from 109-115%, indicating the exchange’s commitment to operating responsibly. CEO Johnny Lyu emphasized that the legal battles were not unique and that the platform continues to operate optimally. In response to the withdrawal delays experienced by users between March 26 and 28, KuCoin announced a special $8.9 million airdrop of its KCS native token and Bitcoin. This airdrop was designed to compensate affected users and reward loyal customers who did not withdraw their assets during the specified period. Lyu reiterated the importance of user trust and satisfaction in the face of challenging circumstances.