In a significant policy shift, Binance US has removed Federal Deposit Insurance Corporation (FDIC) and Securities Investor Protection Corporation (SIPC) protection for cryptocurrency deposits. The change was communicated to users via email. The revised terms of service now require users to convert their U.S. dollars into digital assets such as stablecoins like USDT or USDC or other cryptocurrencies before withdrawal.
This move diverges from Binance US's 2019 claim of providing FDIC insurance coverage up to $250,000 per account. It also contrasts sharply with the policy of competitor Coinbase (NASDAQ:COIN), which continues to maintain FDIC insurance up to $250,000, contingent on accurate customer information.
The decision aligns with the FDIC's warning in its Annual Risk Review about the unique risks posed by cryptocurrencies and the lack of insurance for deposits with crypto-based service providers. As per the new policy, user accounts and digital assets, previously held in pooled custodial accounts, will no longer be FDIC-insured.
The policy update emphasizes that digital assets lack legal tender status or government backing. This comes amid intensifying regulatory scrutiny from the Securities and Exchange Commission (SEC) and other challenges faced by Binance US. The platform has been criticized for limited compliance with a consent order linked to a lawsuit.
Binance CEO Changpeng Zhao, also known as "CZ", has expressed discontent over these regulatory actions. Meanwhile, the SEC has condemned Binance.US for insufficient document production related to its operations.
In a related development, Stephen Ehrlich, ex-CEO of Voyager Digital (NASDAQ:VYGR), faced charges from the Commodity Futures Trading Commission (CFTC) for falsely claiming FDIC insurance on customer accounts. This safety measure was originally established during the Great Depression to protect bank depositors.
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