Cryptocurrency exchange Binance.US has updated its terms of service, signalling a shift in its approach towards direct withdrawals in United States dollars.

The alteration, disclosed on October 16, emphasises that users are now required to convert their U.S. dollar holdings into stablecoins or other digital assets to facilitate the withdrawal of funds from their accounts.

This move follows Binance.US’s decision in early June to suspend dollar deposits in response to mounting regulatory pressure, particularly from the U.S. Securities and Exchange Commission (SEC).

SEC Allegations and Regulatory Challenges

The SEC had taken legal action against Binance, its CEO Changpeng Zhao, and Binance.US, filing 13 charges in June.

The allegations included accusations of a "web of deception," artificially inflated trading volumes, and the diversion of customer funds. The lawsuit prompted Binance.US to suspend dollar deposits, citing the SEC's "extremely aggressive and intimidating tactics" as a factor that deterred banking partners from engaging with the crypto industry.

Shift to Stablecoins for Dollar Withdrawals

In the recent terms update, Binance.US explicitly states, "In the event that customers wish to withdraw U.S. dollar funds from their account, they may do so by converting U.S. dollar funds to stablecoin or other digital assets, which can subsequently be withdrawn."

This marks a significant departure from traditional dollar withdrawal methods and places the onus on users to navigate the conversion process.

Furthermore, the updated terms reveal that U.S. dollar funds in Binance.US wallets are no longer protected by deposit insurance provided by the Federal Deposit Insurance Corporation (FDIC). The loss of this protection adds an additional layer of uncertainty for users. Additionally, Binance’s regulatory challenges are not confined to the U.S., as it recently lost its euro payments partner, with no replacement announced.

Binance is also in the process of adapting to new regulations in the UK, where local authorities have placed new restrictions on crypto asset promotions. Thus far, Binance has announced the suspension of new user registrations in the UK.

Continuous Fiat On-Ramp Struggles

Binance.US has been grappling with challenges related to fiat on-ramps and off-ramps over the past year. The suspension of U.S. dollar deposits in June, followed by the recent restriction on direct dollar withdrawals, underscores the ongoing difficulties the exchange faces in maintaining seamless fiat operations. The move to halt new user registration in the U.K. aligns with the broader trend of heightened regulatory scrutiny globally.

Contrasting Terms from May 2023

Comparing the recent terms update to a version from May 2023, it is evident that Binance.US has evolved its stance on deposit protection. The previous terms included information stating that Binance.US operator BAM, though not an FDIC member or a bank, had collaborated with USD custodians to ensure U.S. dollar deposits were held in omnibus accounts at FDIC-insured banks. This assurance, however, has been omitted in the latest terms, contributing to a climate of increased uncertainty for users.

Binance.US’s strategic adjustments in response to regulatory challenges highlight the complex landscape faced by cryptocurrency exchanges in navigating legal frameworks and maintaining user trust amid regulatory pressures.