Binance US Updates Its Deposit Insurance Policy
On Tuesday, Binance US, the American subsidiary of the largest crypto exchange, Binance, told users that their crypto assets on the platform were no longer insured by the Federal Deposit Insurance Corporation (FDIC). The company claimed it had taken the move to change its deposit insurance policy after consulting with FDIC.
In 2019, Binance US announced that user accounts holding crypto worth $250,000 or less would be insured with FDIC. For beginners, the Federal Deposit Insurance Corporation is a United States government agency founded in 1933 by President Franklin Roosevelt to protect Americans from losing their entire deposits in the event their banks collapse.
Following the latest move by Binance US, the trading platform’s terms of service now include this statement: “Your digital assets and accounts are ineligible for Insurance protections provided by FDIC.”
Moreover, the exchange has also stated that customers must now convert their USD holdings to crypto assets, including stablecoins, to withdraw funds. Stablecoins are cryptocurrencies pegged to stable assets like fiat currencies. Two of the biggest stablecoins are Circle’s USDC and Tether’s USDT.
The FDIC and Crypto
The Binance US announcement regarding its new insurance policy comes a few weeks after FDIC released a statement saying that funds deposited with crypto exchanges were not protected by the agency. The corporation warned that the US government would not help anyone holding money with cryptocurrency exchanges to recover it when those platforms fail.
A week ago, the United States Federal Trade Commission (FTC) and the Commodities and Futures Trading Commission (CFTC) brought a lawsuit against Stephen Ehrlich, the ex-CEO of now-fallen cryptocurrency broker Voyager Digital, accusing him of lying that user accounts were insured by the FDIC.
FTC and CFTC’s Lawsuit Against Voyager
In the lawsuit, the two American regulators alleged that Enrlich published several statements touting Voyager as a safe platform for storing digital assets while falsely claiming that the Federal Deposit Insurance Corporation insured users’ assets.
Voyager was among the many crypto companies that collapsed last year following the downfall of the Terra ecosystem, which caused a marketwide contagion.
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