Binance US, a prominent cryptocurrency exchange, has made a substantial policy shift by discontinuing Federal Deposit Insurance Corporation (FDIC) and Securities Investor Protection Corporation (SIPC) coverage for cryptocurrency deposits. Users were informed of this change via email. The revised terms of service now stipulate that users must convert their U.S. dollars into digital assets like stablecoins, including USDT or USDC, or other cryptocurrencies before making withdrawals.
This policy adjustment marks a significant departure from Binance US’s earlier assertion in 2019 that it provided FDIC insurance coverage of up to $250,000 per account. Notably, it stands in stark contrast to the policy upheld by its competitor, Coinbase (NASDAQ: COIN), which continues to offer FDIC insurance coverage of up to $250,000, contingent on the accuracy of customer information.
Binance US’s decision aligns with the FDIC’s cautionary statements in its Annual Risk Review regarding the distinctive risks posed by cryptocurrencies and the absence of insurance for deposits held with crypto-based service providers. As per the updated policy, user accounts and digital assets, formerly held in pooled custodial accounts, will no longer be covered by FDIC insurance.
The revised policy underscores that digital assets do not possess the status of legal tender or government backing. This change occurs against the backdrop of mounting regulatory scrutiny from the Securities and Exchange Commission (SEC) and other challenges facing Binance US. The platform has faced criticism for its limited compliance with a consent order associated with a legal dispute.
Binance CEO Changpeng Zhao, popularly known as “CZ,” has voiced his dissatisfaction with these regulatory actions. Meanwhile, the SEC has criticized Binance.US for its insufficient production of documents related to its operations.
In a related development, Stephen Ehrlich, the former CEO of Voyager Digital, has been subject to charges from the Commodity Futures Trading Commission (CFTC) for making false claims of FDIC insurance on customer accounts. This safety measure was originally established during the Great Depression to safeguard bank depositors.
