Binance's American entity informed users today that their crypto holdings with the exchange are no longer FDIC-insured.
An email sent to users today and seen by Decrypt announced that Binance US has "updated the deposit insurance language" in the firm's terms of service. It indicated that it had done this following guidance from the FDIC.
The firm first announced that Binance US accounts were insured up to $250,000 in 2019 in a now-deleted blog post.
"All USD deposits are held in pooled custodial accounts at multiple banks that are insured by the FDIC," the post read at that time. "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."
The Federal Deposit Insurance Corporation (FDIC) is a U.S. government entity established in 1933 in the wake of the Great Depression. President Franklin D. Roosevelt erected the FDIC at the time to protect American citizens from losing their money–up to a certain amount–should their bank collapse.
The exchange's updated terms of service now read: "Your accounts and digital assets are not eligible for FDIC insurance protections."
The update also indicates that users will no longer be able to withdraw U.S. dollars without first converting them into stablecoins or another cryptocurrency.
A stablecoin is a cryptocurrency pegged to a fiat currency, with the largest USD-denominated stablecoins being Tether's USDT and Circle's USDC.
The updates to the exchange's language come amid its transition to a "crypto-only" exchange following charges brought by the Securities and Exchange Commission in the United States.
In June, the SEC charged Binance.US, Binance (the non-U.S. entity), and its CEO Changpeng Zhao for allegedly listing unregistered securities. Shortly after, Binance.US announced that its banking partners were "preparing to pause fiat (USD) withdrawal channels." It cited "extremely aggressive and intimidating tactics" against the firm.
Binance US declined to comment.
Crypto and the FDIC
The update comes fast on the heels of the FDIC warning individuals that money deposited with a "crypto-based financial services provider" is not FDIC-insured or protected.
"Know that crypto deposits are not FDIC-insured, period," reads the FDIC's statement. "If something happens, the government may not have an obligation to step in and help get your money back."
Last week, the Federal Trade Commission (FTC) charged Stephen Ehrlich, the former CEO of now-collapsed crypto broker Voyager Digital, for falsely claiming that customer accounts were FDIC-insured.
The Commodities and Futures Trading Commission (CFTC) also charged Ehrlich with fraud and registration failures.
“Ehrlich and Voyager falsely touted the Voyager platform as a 'safe-haven' to earn high-yield returns to induce customers to purchase and store digital asset commodities,” wrote the CFTC in a statement on Thursday.
Edited by Stephen Graves