Binance US Changes Policy by Eliminating FDIC Insurance on Crypto Deposits

In a notable policy change, Binance US has eliminated Federal Deposit Insurance Corporation (FDIC) and Securities Investor Protection Corporation (SIPC) protection for cryptocurrency deposits. Users were informed of this change through an email. The updated terms of service now require users to convert their U.S. dollars into digital currencies, such as stablecoins like USDT or USDC, or other cryptocurrencies prior to withdrawal.

This shift moves away from Binance US’s 2019 assertion of providing FDIC insurance coverage of up to $250,000 per account. In contrast, competitor Coinbase continues to offer FDIC insurance up to the same amount, dependent on the accuracy of customer information.

The change coincides with the FDIC’s warning in its Annual Risk Review regarding the unique risks associated with cryptocurrencies and the absence of insurance for deposits held with crypto service providers. According to the new policy, user accounts and digital assets that were previously stored in pooled custodial accounts will no longer be FDIC-insured.

The policy update clarifies that digital assets do not have legal tender status or governmental backing. This announcement comes amid heightened regulatory scrutiny from the Securities and Exchange Commission (SEC) and various challenges facing Binance US, which has been criticized for insufficient compliance with a consent order linked to a lawsuit.

Binance CEO Changpeng Zhao, often referred to as "CZ", has voiced his dissatisfaction with these regulatory measures. In the meantime, the SEC has condemned Binance US for not providing adequate documentation regarding its operations.

In a related incident, Stephen Ehrlich, the former CEO of Voyager Digital, has been charged by the Commodity Futures Trading Commission (CFTC) for misleadingly asserting that customer accounts had FDIC insurance. This protective measure was originally instituted during the Great Depression to safeguard bank depositors.

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