Recently, KuCoin has been facing legal challenges from US authorities, resulting in a significant drop in user assets on the platform. The latest proof-of-reserve certificate from the exchange revealed that users’ Bitcoin holdings decreased by 25.4% to 12,114 BTC in March. Additionally, Ethereum balances plummeted by approximately 22% to around 112,000 ETH, and the amount of Tether’s USDT held by users dropped by about 22% to 963 million USDT tokens.
Data from DeFiLlama further supports the downtrend in user assets on KuCoin, with over $843 million worth of digital assets being withdrawn from the platform during the past week. This led to KuCoin’s balance decreasing to $3.2 billion from over $4.3 billion recorded on March 26. Despite the outflows, the exchange’s proof-of-reserves certificate shows that the firm has fully backed assets within its system, with token collateralization ranging from 109-115%.
KuCoin’s recent challenges have had a significant impact on its market share and trading volume. According to Kaiko data, the exchange’s daily trading volume dropped to around $520 million from approximately $2 billion, while its market share decreased from about 6.5% to less than 3%. Users have been transferring their assets to rival centralized exchanges like Coinbase, Binance, and OKX, with some market makers leaving the exchange as well.
Despite the legal battles, KuCoin has been proactive in touting its compliance efforts. CEO Johnny Lyu mentioned that the exchange’s legal battles are not unique and that the platform continues to operate optimally. In an attempt to compensate users who experienced withdrawal delays between March 26 and 28, KuCoin announced a special $8.9 million airdrop of its KCS native token and Bitcoin. Users who did not withdraw assets are expected to receive more in reward for their loyalty.
KuCoin’s user assets have taken a hit due to recent legal challenges from US authorities. The decline in user assets, coupled with a decrease in market share and trading volume, poses significant challenges for the exchange. Despite these setbacks, KuCoin remains committed to its users and compliance efforts, as evidenced by the recent airdrop initiative to compensate affected users. Moving forward, it will be crucial for KuCoin to address the legal issues promptly and rebuild trust with its user base.