KuCoin Market Share Plunges By 50% Amid Legal Tussle With US Authorities

KuCoin’s market share has recorded a significant decline, falling from about 6.5% to less than 3% due to massive outflows of funds. This is according to a Kaiko data report on April 2.

The market share decline follows a back-to-back lawsuit filed against the US Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) on March 26.

KuCoin Market Customers Continues to Transfer Funds to Centralized Exchanges

As detailed in the Kaiko research report, the exchange’s daily trading volume fell from $2 billion to $520 million, resulting in a dip in its market share.

Notably, KuCoin market customers are continuously moving their funds to other exchanges such as Binance, Coinbase, Gate.io, OKX, and MEXC, which they arguably find safer.

Market makers leaving the exchange account for some of these outflows, while other customers are transferring funds directly to their own self-custodial wallet

According to the data, outflows from KuCoin wallets, most of which were USDT and ETH, were estimated to be over $600 million on March 26, exceeding inflow by a large margin. Recall that the exchange recorded over $1 billion in outflows within 24 hours on March 27.

Kucoin users have been moving their funds to other centralized exchanges such as Coinbase, Binance, OKX, MEXC, and https://t.co/H39mEDF3Cm, which they perceive as safer options. pic.twitter.com/FaslOOs1m3

— Kaiko (@KaikoData) April 3, 2024

In the same vein, data from Nansen revealed on March 27 that the exchange had recorded outflows of over $842 million on Ethereum and $938 million on Ethereum-Virtual Machine (EVM) chains from an initial storage of $6 billion.

An update on @kucoincom withdrawals

At the time of writing, over the past 24 hours, there has been an outflow of over $842m on Ethereum and $938m on EVM chains from an initial $6b base in holdings

This is more than a 15% drop in assets held by the exchange pic.twitter.com/Gy8gPMLROp

— Nansen 🧭 (@nansen_ai) March 27, 2024

However, the on-chain data researcher explained that the inflows and outflows only included on-chain transactions between the platform and other exchanges or wallets and not between KuCoin addresses. 

KuCoin $8.95M Failed to Halt Massive Outflow

KuCoin’s market share started to decline on March 26 following the lawsuits from the US DOJ and CFTC for breaching anti-money laundering laws and operating an illegal digital asset derivative exchange.

In the DOJ’s allegation, KuCoin and its founders were accused of money laundering.

The exchange had claimed it had no customers in the United States, but investigations from the DOJ revealed that the platform served a substantial American user base, which violated anti-money laundering (AML) regulations.

The charges further alleged that KuCoin intentionally ignored U.S. know-your-customer (KYC) and AML requirements, saying that the exchange processed over $3 million from the sanctioned crypto mixer, Tornado Cash, between August 20,22 and November 2023 alone.

For its part, KuCoin has maintained the stance that its platform remains secure and operational while denying any wrongdoing in official statements, saying:

“KuCoin is operating well, and the assets of our users are absolutely safe. We are aware of the related reports and are currently investigating the details through our lawyers. KuCoin respects the laws and regulations of various countries and strictly adheres to compliance standards.”

The indictment caused panic among KuCoin customers, leading to a huge transfer of funds from the platform, which also slowed down withdrawal time.

To mitigate this effect, KuCoin announced a $10 million airdrop program for customers who experienced congestion during withdrawal, alongside a future aid for users who couldn’t withdraw their assets.

Unfortunately, this was not enough as customers continued to withdraw their assets, leading to a massive exodus of outflows on KuCoin market share to dipped more than 50%.