Binance.US users find themselves facing a notable change in their withdrawal options following a recent update to the platform's terms of use, which came into effect on Monday.

Notably, this alteration also signifies a shift in the status of United States (US) dollar funds held in Binance.US wallets.

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Previously protected by deposit insurance provided by the Federal Deposit Insurance Corporation (FDIC), these funds are no longer afforded such safeguards.

Option to "Convert" USD To Stablecoins

On 16 October, Binance.US introduced modifications to its terms of service, specifically focusing on the "BAM Fiat Wallet" section, which pertains to the custody of US dollars.

In this revised version, Binance.US communicated to its users that they now have the option to "convert" their US dollar holdings into stablecoins or other digital assets in order to facilitate withdrawals from their accounts.

The email to users stated:

"In the event that customers wish to withdraw US dollar funds from their account, they may do so by converting US dollar funds to stablecoin or other digital assets, which can subsequently be withdrawn. Any US dollar deposits that are not withdrawn by the deadline provided in the notice will be converted to stablecoin digital assets and transferred to your digital assets account."

Crypto Community Reacts To Updates

This policy change did not go unnoticed by the cryptocurrency community, with many individuals taking to social media, including X (formerly known as Twitter), to discuss the implications of this development.

One crypto observer on X remarked:

"Binance seizes USD. Don't worry you can buy Tethers printed out of thin air or shitcoins."

What makes this update particularly significant is the marked difference it bears compared to a version of Binance.US' terms of service from May 2023.

At that time, the platform conveyed information that has since been removed, indicating that BAM, the operator behind Binance.US, is not a member of the FDIC and does not function as a bank.

Instead, BAM had reportedly collaborated with USD custodians to ensure that US dollar deposits were held in omnibus accounts at FDIC-insured banks.

This arrangement was intended to render these funds eligible for FDIC insurance coverage, with a limit of $250,000 per eligible individual, though this coverage would only come into play in the event of a bank failure.

The terms of use from May read:

“In the event the bank does fail [...]it is possible that your account(s) with the bank and the fiat [...] will be aggregated for purposes of determining your eligibility for FDIC deposit insurance. FDIC insurance does not protect against the failure of BAM or malfeasance by any BAM employee."

This development is just one of several instances where Binance.US has encountered challenges in maintaining its fiat on-ramps and off-ramps over the past year, as it has had to curtail certain US dollar operations.