Binance.US, the American subsidiary of the global cryptocurrency exchange Binance, recently made changes to its terms of service that have caught the attention of its customers. In an email sent to users, Binance.US removed the language that previously stated deposits were insured by the Federal Deposit Insurance Corporation (FDIC).
Additionally, Binance.US now requires customers to convert their US dollars to either a stablecoin or another digital asset in order to make withdrawals from the exchange. The updated terms of service state, “Your Accounts and digital assets are not eligible for FDIC insurance protections. In the event you wish to withdraw US dollar funds from your Account, you may convert such US dollar funds to stablecoin or other digital assets, which can subsequently be withdrawn.”
The email from Binance.US explained that the changes were made in accordance with guidance received from the FDIC. It clarified that digital assets are not legal tender, not backed by any government, and accounts and value balances are not subject to protections or insurance provided by the FDIC or the Securities Investor Protection Corporation (SIPC).
Binance.US had announced its transition to a crypto-only exchange in late July, indicating that it would no longer support USD services until it onboarded stable banking partners. This move was prompted by a lawsuit from the US Securities and Exchange Commission (SEC), which resulted in customer withdrawals being temporarily paused to facilitate the transition to an all-crypto exchange.
While Binance.US later restored USD withdrawals and expressed its intention to seek additional USD deposit/withdrawal bank partners, the recent change in its terms of service removes the previous assurance of FDIC insurance for customer deposits. This move aligns with the FDIC’s clarification that it does not cover crypto custodians, exchanges, or wallet providers, as it specifically covers insured banks.
The FDIC’s stance on crypto insurance has become more prominent recently. In June, it sent a letter to OKCoin (now known as OKX), accusing its CEO Hong Fang and other executives of making false or misleading statements about FDIC insurance. The agency has consistently emphasized that it only covers insured banks and not crypto-related platforms.
Binance.US is just the latest firm to remove FDIC insurance language from its terms of service. The Federal Trade Commission (FTC) and Commodity Futures Trading Commission (CFTC) filed a lawsuit against bankrupt lender Voyager and its former CEO Stephen Ehrlich this month, alleging deceptive claims regarding FDIC insurance. The FTC revealed that both Voyager and Ehrlich were aware that the company itself was not insured, thus leaving customer deposits unprotected.
It is important to note that Binance.US did not immediately respond to requests for comment regarding these changes. As the cryptocurrency ecosystem continues to evolve, it is crucial for users to understand the level of insurance protection provided by various platforms and make informed decisions when engaging in crypto-related activities.
Overall, Binance.US’s removal of FDIC insurance language and the requirement for USD-to-crypto conversion for withdrawals reflects a broader trend in the industry. With the FDIC’s clarification and recent legal actions, it is essential for both crypto platforms and users to be aware of the limitations and risks associated with insurance coverage.
Frequently Asked Questions:
Q: What changes did Binance.US make to its terms of service?
A: Binance.US removed the language stating that deposits were insured by the FDIC and now requires customers to convert their USD into a stablecoin or other digital asset for withdrawals.
Q: Why did Binance.US make these changes?
A: Binance.US made these changes in accordance with guidance received from the FDIC.
Q: Are digital assets covered by FDIC insurance?
A: No, digital assets are not eligible for FDIC insurance protections. They are not legal tender, not backed by any government, and not subject to FDIC or SIPC protections.
Q: Why did Binance.US transition to a crypto-only exchange?
A: Binance.US made this transition due to a lawsuit from the SEC, which resulted in temporary pauses on customer withdrawals. They also cited the need to onboard stable banking partners for USD services.
Q: Are other crypto platforms removing FDIC insurance language?
A: Yes, there has been a trend of crypto platforms removing such language from their terms of service, as the FDIC only covers insured banks.
Q: How can users protect their funds in the absence of FDIC insurance?
A: Users should exercise caution and conduct thorough research before engaging with any crypto platform. It is also advisable to consider additional security measures, such as using hardware wallets or cold storage for storing digital assets.
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