Binance.US, the American subsidiary of the global cryptocurrency exchange, has updated its terms of service. Consequently, users can no longer withdraw U.S. dollars directly from the platform. Effective immediately, customers wishing to withdraw must first convert U.S. dollar funds to stablecoins or other digital assets. These assets can then be withdrawn, thus introducing an extra layer of complexity for users.
Moreover, the exchange initially suspended dollar deposits back in early June. It cited “extremely aggressive and intimidating tactics” by the U.S. Securities and Exchange Commission (SEC) against the crypto sector as the main culprit. This stance has made banking partners reluctant to engage with the industry, further complicating the company’s operations in the United States.
SEC lawsuit and erosion of banking partners
The SEC sued Binance.US, the firm’s international arm Binance, and its founder Changpeng “CZ” Zhao, on June 5. The lawsuit alleges that they operated unregistered securities platforms. Since then, the SEC has also questioned the company’s custody practices and its willingness to cooperate in legal requests. Additionally, Binance lost its euro payments partner last month, and a replacement has yet to be announced.
To add to the complexities, the email announcing the updated terms clarified that U.S. dollar funds in Binance.US wallets are no longer protected by Federal Deposit Insurance Corporation (FDIC) deposit insurance. This marks a significant shift from earlier terms that suggested some protection for U.S. dollar deposits. It also sets Binance.US further apart from traditional financial institutions, where FDIC insurance is often taken for granted.
Reactions from the cryptocurrency community have been swift. Many took to X (formerly known as Twitter) to express their concerns. One crypto observer noted, “Binance seizes USD. Don’t worry, you can buy Tethers printed out of thin air or shitcoins.” The update also stressed that digital assets are not eligible for FDIC insurance, mirroring similar cautions in previous updates.
Furthermore, Binance.US is clarifying that they are not a bank but have previously worked with U.S. dollar custodians to ensure deposits were held in FDIC-insured banks. These new changes come as another blow to the company’s credibility and operational ease. It signals a larger issue that Binance.US is facing: the growing challenges of maintaining its fiat on-ramps and off-ramps, especially in a stringent regulatory environment.
As Binance.US navigates this increasingly intricate regulatory maze, users are advised to exercise caution. With direct dollar withdrawals now halted, customers must consider the added risk and complexity of using the platform for their financial activities. As the exchange treads a delicate balance between regulatory compliance and user convenience, only time will tell how these changes impact its position in the market.
