The Merge – Binance to halt ETH and ERC-20 deposits and withdrawals

Binance has announced plans to suspend deposits and withdrawals of Ether (ETH) and ERC-20 tokens once The Merge takes place i.e when the ETH network switches to its proof-of-stake (PoS) Beacon chain.
The Merge - Binance to halt ETH and ERC-20 deposits and withdrawals
The Merge – Binance to halt ETH and ERC-20 deposits and withdrawals

The move was revealed by the largest exchange in the world by transaction volume in an effort to maintain stability during ‘The Merge,’ which is expected to occur in mid-September 2022. Following Coinbase earlier in August 2022, Binance is now the second significant exchange to announce the suspension of ETH deposits and withdrawals.

The exchange is timing suspensions with two significant upgrades that will make it easier for Ethereum to transition from proof-of-work (PoW) to proof-of-stake (PoS), according to a statement from Binance.

The exchange warned that a hard fork could result in the creation of a new token, mandating measures to lower trade risks and guarantee the security of user money that might be impacted by price volatility.

On September 6 during the Bellatrix consensus layer upgrade and on September 15 during the Paris execution layer upgrade, Binance will halt deposits and withdrawals of ETH and ERC-20 tokens.

The exchange presented two additional possibilities that it believes are likely to happen during the Merge. In Scenario A, there is no new token produced, in which case Binance would proprietarily resume deposits and withdrawals for ETH and ERC-20 tokens.

The second scenario takes into account the potential for the Ethereum chain to break into two rival chains, which would result in the creation of a new coin. Binance will use the ETH ticker for the Ethereum PoS chain in this possible scenario.

The forked cryptocurrency from the minority chain will subsequently be credited to users’ Binance accounts at a 1:1 ratio. This will be based on an image of ETH balances taken just before the expected Paris execution layer update on September 15.

In a separate announcement that will be made closer to the time, Binance has said that withdrawals for a potential forked cryptocurrency would be supported and will go into further information about the distribution.

While users are recommended to take risk mitigation steps during times of price volatility surrounding hard fork circumstances, spot trading in ETH and ERC-20 will not be impacted during The Merge.

While stating that ETH cross and isolated margin pair shouldn’t be impacted, Binance will also stop ETH cross and isolated margin borrowing from September 14 to September 16.

Although Binance has stated that it may take extra protective steps, such as modifying margin tiers such as maximum leverage value and maintenance margin, trading of USDS-M and COIN-M ETH Futures Contracts is anticipated to remain unaffected.

Once the Merge has occurred, Ethereum PoW miners will be able to move their hash power to the Ethereum Classic Binance Pool.