Binance.US Removes FDIC Insurance Language from Terms of Service
Binance.US, the popular cryptocurrency exchange, recently made changes to its terms of service, specifically regarding the eligibility of accounts for FDIC insurance. In an email sent to customers and shared with Blockworks, Binance US announced the removal of language that previously stated deposits were insured by the Federal Deposit Insurance Corporation.
New Withdrawal Requirements for Binance.US Customers
Along with the removal of FDIC insurance eligibility, Binance.US also introduced new withdrawal requirements. According to the updated terms of service, customers must convert their US dollars to a stablecoin or other digital asset in order to withdraw funds from the exchange. The terms explicitly state that “Your Accounts and digital assets are not eligible for FDIC insurance protections.” Hence, if customers wish to withdraw US dollar funds, they must first convert them into a suitable digital asset.
The changes were made in compliance with guidance received from the FDIC. Binance explained in the customer email that digital assets are not legal tender, are not backed by any government, and are not subject to protections or insurance provided by the FDIC or the Securities Investor Protection Corporation.
Binance.US Transitions to Crypto-Only Exchange
This recent update from Binance.US comes after the exchange announced its transition to a crypto-only exchange in late July. The exchange clarified that it does not currently support USD services until stable banking partners are onboarded. However, they advised customers to open accounts with trusted platforms that allow crypto purchases using USD.
The decision to transition to a crypto-only exchange was prompted by a lawsuit from the US Securities and Exchange Commission (SEC) in June. Binance.US had to temporarily pause customer withdrawals to facilitate this transition due to banking partners signaling their intent to pause USD fiat channels.
Ten days later, Binance.US restored USD withdrawals, but they cautioned that they may discontinue USD withdrawals in the future. The exchange announced its search for additional USD deposit/withdrawal bank partners to ensure smooth operations.
FDIC Insurance and Crypto Custodians
The Federal Deposit Insurance Corporation has made it clear in recent months that it does not cover crypto custodians, exchanges, or wallet providers. The agency’s insurance coverage is specific to insured banks only.
This clarification was highlighted in a letter sent to OKCoin (now known as OKX) in June. The FDIC accused CEO Hong Fang and other executives of making false or misleading statements about FDIC insurance. OKCoin had claimed FDIC insurance, which turned out to be untrue.
Recent Scrutiny on FDIC Insurance Claims
The Federal Trade Commission (FTC) and Commodity Futures Trading Commission (CFTC) have also been scrutinizing claims related to FDIC insurance. They recently took action against bankrupt lender Voyager and its former CEO Stephen Ehrlich.
The FTC alleged that Voyager and Ehrlich made deceptive claims about FDIC insurance protection for customer deposits. However, it was discovered that Voyager was not insured, and therefore customer deposits were not protected. The FTC stated that both Ehrlich and Voyager were aware of this fact, making their claims misleading and deceptive.
Frequently Asked Questions (FAQs)
1. What changes did Binance.US make to its terms of service?
Binance.US removed the language stating that deposits were insured by the FDIC. Customers are now required to convert their US dollar funds to stablecoins or other digital assets in order to withdraw from the exchange.
2. Why did Binance.US make these changes?
The changes were made in accordance with guidance received from the FDIC. The FDIC does not provide insurance coverage for crypto custodians, exchanges, or wallet providers.
3. Can customers still withdraw US dollars from their Binance.US accounts?
Yes, customers can still withdraw US dollar funds by converting them to stablecoins or other digital assets. These digital assets can then be withdrawn.
4. What is the reason behind Binance.US transitioning to a crypto-only exchange?
Binance.US made the decision to become a crypto-only exchange due to a lawsuit from the SEC and the intent of their banking partners to pause USD fiat channels.
5. Are digital assets covered by FDIC insurance?
No, digital assets are not covered by FDIC insurance. They are not legal tender and are not backed by any government.
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