The embattled crypto exchange Binance.US issued updated service terms. The update directs users to prioritize the conversion of dollar balances to stablecoins or other crypto for successful withdrawal.
The Binance crypto exchange targeting US crypto clients informed the users that their crypto holdings are no longer insured by the Federal Deposit Insurance Corporation (FDIC). The email sent to the Binance.US users confirmed that the US-based crypto exchange revised the deposit insurance language utilized within its service terms.
The local crypto exchange initially informed the US citizens that its Binance.US accounts had limited insured cover to $250,000. However, the 2019 announcement is now deleted from the official blog post.
Binance.US Service Terms Expressly State Ineligible for FDIC Insurance Protections
The 2019 announcement assured that all USD-denominated deposits were pooled into the custodial accounts run in multiple banks. Besides, the statement informed the users that the maintenance of the pooled custodial accounts would guarantee access and FDIC insurance coverage to the extent of depositor coverage limit of $250,000.
The Federal Deposit Insurance Corporation (FDIC) is a government agency started in 1933 following the Great Depression that hit the United States. President Franklin Roosevelt initiated the FDIC to safeguard US citizens from losing deposits to a guaranteed amount whenever the bank collapses.
The recent update to the Binance.US service terms expressly states that digital assets and accounts are ineligible for FDIC insurance protections. The update informs the users that they cannot withdraw the US dollar balances unless through conversion into stablecoins or other cryptos.
The Binance.US statement considers stablecoin as the cryptocurrency pegged to the fiat currency. Users can convert their balances into USD-denominated stablecoins, including Circle’s USDC and Tether’s USDT.
The update to the service terms comes days after FDIC warned US citizens that money deposited with crypto-based financial services providers are excluded from the FDIC insurance coverage. The FDIC statement warned that the US government is not obligated to intervene and help recover the money in case of the crypto provider collapse.
FDIC Excludes Crypto-Related Deposits From Insurance Coverage
The FDIC statement declaring crypto-related deposits excluded from the insurance coverage became evident by the charging of a former Voyager Digital chief executive. The Federal Trade Commission (FTC) opened charges against Stephen Ehrlich, identified as the former chief executive in the now-collapsed Voyager Digital. The former chief of crypto broker misled the clients by indicating the customer accounts would benefit from the FDIC insurance.
Meanwhile, Voyager Digital and the former chief are also facing additional charges from the Commodities and Futures Trading Commission (CFTC), alleging fraud and noncompliance with the registration procedures.
The CFTC statement issued on Thursday, October 12, revealed that Voyager Digital and Ehrlich misled the customers to believe the platform was a haven. The accused portrayed the platform as guaranteeing high-yield returns, inducing the customers to acquire and store digital asset commodities with the platform.
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