Why would banks and exchanges need to pause withdrawals if they’re in financial trouble?
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If you’re a bank, the worst thing that can happen is someone coming up to the counter asking for their money and you not being able to give it to them. That causes your customers (account holders) to lose all confidence in you, and they will all promptly try to withdraw their money in hopes that they can get some of their money out. This is called a bank run or a run on the bank.
Side note: most if not all privately held accounts at banks are protected by the FDIC, the Federal Deposit Insurance Corporation. The FDIC protects banks and their customers by guaranteeing each account up to $250,000; if you try to withdraw and the bank is unable to pay you, the FDIC will pay out for you instead.
So a bank temporarily stopping withdrawals is a way to get ahead of a bank run. The idea is to buy time while the bank tries to get more funds in (from loan payments or other assets), so that they can reopen later, pay out withdrawals, and not run out of money.
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