In a recent development, Binance.US, the American arm of global cryptocurrency exchange Binance, has withdrawn its Federal Deposit Insurance Corporation (FDIC) insured status. The move comes following recommendations from the FDIC and means that crypto deposits, which are not legal tender or government-backed, are no longer insured.
Binance.US communicated these changes to its customers via email. The updated terms of service require users to convert fiat U.S. dollars into digital currencies like stablecoins for withdrawal. Previously, the exchange offered FDIC coverage of up to $250,000 per account, similar to Coinbase (NASDAQ:COIN)'s pass-through FDIC insurance policy.
The decision to renounce FDIC-insured status is concurrent with ongoing regulatory scrutiny from U.S. authorities, including the Securities and Exchange Commission (SEC). The SEC has accused Binance.US and BAM Trading Services Inc. of non-compliance with a consent order in a lawsuit and non-disclosure of all requested documents discussed in a September 18 hearing.
Binance CEO Changpeng Zhao, known as "CZ", has criticized these regulatory actions. Binance.US has deemed the SEC's continuous requests "unreasonable".
This shift in FDIC insurance status for crypto assets highlights potential risks and regulatory challenges in the industry. Notably, Stephen Ehrlich, former CEO of the now-defunct crypto broker Voyager Digital (NASDAQ:VYGR), faced charges from the Commodity Futures Trading Commission (CFTC) for making false claims about FDIC coverage and registration failures.
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