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Binance.US, the United States arm of crypto exchange Binance, has updated its terms of service (ToS), indicating that all US dollar (USD) holdings on the platform are no longer FDIC-insured.
The leading exchange made this known in an email sent to users earlier today. Binance.US noted that it implemented the decision following guidance it received from the Federal Deposit Insurance Corporation (FDIC).
Binance Makes U-turn on FDIC Insurance Coverage
Prior to today’s announcement, all USD held in Binance.US accounts were FDIC-insured up to $250K. The exchange noted in a now-deleted blog post in 2019 that “all USD deposits are eligible for FDIC insurance coverage” and held in pooled accounts across multiple banks.
It added that “the pooled custodial accounts are maintained in a manner that provides access to pass-through FDIC insurance coverage up to the depositor coverage limit, which is currently $250,000.”
Notably, the updated ToS now indicates that digital assets held in Binance.US accounts are no longer eligible for FDIC coverage.
All USD Withdrawals Suspended
Furthermore, Binance.US also stated that it has suspended all direct US dollar (USD) withdrawals.
Per the announcement, users will first have to convert their USD to dollar-denominated stablecoins or other digital assets before making the withdrawal.
The development comes over four months after the exchange halted all USD deposits on its platform.
FDIC Insurance No Longer Covers Crypto Deposits
For context, the FDIC was launched in 1933 during the Great Depression to protect Americans from losing their funds when their banks collapsed.
Since its launch, top financial institutions, including crypto-related firms, have leveraged the service to insure their customers’ funds.
However, the Federal Trade Commission (FTC) recently warned that the FDIC insurance only covers bank deposits and not funds deposited in crypto-related companies.
“Know that crypto deposits are not FDIC insured, period. If something happens, the government may not have an obligation to step in and help get your money back,” the FTC noted.
Binance Regulatory Woes
Meanwhile, Binance has continued to encounter regulatory challenges in recent times. Notably, the ongoing legal tussle between Binance and the SEC has been the top event of the exchange’s regulatory woes.
As reported by The Crypto Basic, the SEC charged Binance and its entities with violating federal securities laws by operating an unregistered securities exchange. The regulator also labeled multiple crypto assets, including ADA, BNB, SOL, and MATIC, as securities.
Expectedly, Binance filed a motion to dismiss the SEC’s charges. The court has yet to issue a ruling on the matter.