Binance US Removes FDIC Insurance Coverage for Crypto Deposits
Binance US, the largest crypto exchange in the world, has informed its users that their cryptocurrency deposits are no longer protected by Federal Deposit Insurance Corporation (FDIC) insurance. This announcement was made through an email sent to customers on October 16. The update to Binance US’s terms of service aligns with guidance from the FDIC.
The change specifically affects the “BAM Fiat Wallet,” which is responsible for storing US dollars. Users will no longer be able to withdraw USD directly from their accounts; instead, they will need to convert their funds to stablecoins or other cryptocurrencies in order to manage their holdings.
“In the event that customers wish to withdraw US dollar funds from their account, they may do so by converting US dollar funds to stablecoin or other digital assets, which can subsequently be withdrawn.”
The revised terms emphasize that digital assets do not have government backing and are not considered legal tender. As a result, accounts and value balances are not covered by FDIC or Securities Investor Protection Corporation (SIPC) insurance.
Binance.US Faces Regulatory Scrutiny and Legal Battle
Binance US is currently facing regulatory scrutiny led by the Securities and Exchange Commission (SEC). In June, the SEC filed a lawsuit against Binance US and its founder Changpeng Zhao (CZ), accusing them of operating unregistered securities platforms and violating securities rules.
The SEC has also raised concerns about custody practices and Binance.US’s willingness to cooperate with legal requests. On the other hand, Binance.US has criticized the SEC for making unreasonable demands following a hearing in September.
In response to pressure from the SEC, Binance US suspended dollar deposits in June. The exchange cited aggressive tactics from regulators that made banking partners hesitant to collaborate with the crypto industry.
Hot Take: Binance US Removes FDIC Insurance Coverage for Crypto Deposits
Binance US recently announced that cryptocurrency deposits will no longer be covered by FDIC insurance. This change means that users will need to convert their funds to stablecoins or other cryptocurrencies in order to manage their holdings. The update aligns with guidance from the FDIC and emphasizes that digital assets are not legal tender and do not have government backing.
This decision comes amidst regulatory scrutiny faced by Binance US, including a lawsuit from the SEC alleging unregistered securities operations. The exchange has also faced challenges with its euro payments partner. These developments highlight the evolving landscape of cryptocurrency exchanges and their interactions with traditional financial systems.
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