HomeCryptoBinance US suspends withdrawals in fiat currency (USD)

Binance US suspends withdrawals in fiat currency (USD)

Yesterday, Binance US changed the exchange’s terms of use by effectively inserting a total block on fiat currency (USD) withdrawals. 

Specifically, they added the following explicit sentence: 

“In the event you wish to withdraw U.S. dollar funds from your Account, you may convert such U.S. dollar funds to stablecoin or other digital assets, which can subsequently be withdrawn.”

Back in June, however, the US exchange suspended dollar deposits, warning that sooner or later they would also suspend withdrawals. 

Binance US and the blocking of withdrawals in fiat currency (USD)

It is important to clarify that Binance US is not Binance, but the version of the famous exchange dedicated exclusively to the U.S. market. In contrast, the international version of the site used in the rest of the world is Binance.com. 

Binance US is not even owned by Binance, but by an American company that runs it independently. 

At least that is what is stated, although U.S. authorities suspect that instead it is ultimately controlled by Binance anyway. 

However, the important thing is that it is for all intents and purposes another company, because it means that in the event of a bankruptcy of Binance US this would not touch Binance.com as well. 

The fact is that Binance US has been having problems with U.S. authorities for some time now, so much so that its daily trading volumes on the spot market have plummeted below $20 million. 

For example, Binance.com is still well above $6 billion, and Binance US is now also surpassed by Gemini ($27 million) and Binance TR (i.e., the Turkish market version). 

So it is important not to confuse the U.S. market version of the famous account with the international one, because they are two distinctly different things. However, this does not detract from the fact that even the international version in some countries has some problems with fiat currencies. 

Withdrawals in fiat currencies

Added to this is the fact that Binance US has not suspended withdrawals, only USD withdrawals. 

In fact, as stated in the new terms of service, they advise their users who want to withdraw USD to convert it to stablecoin, so then they can proceed with the withdrawal. 

In fact, stablecoin withdrawals have not been suspended, and in fact withdrawing USDT or USDC instead of USD is not all that different. 

The main difference is that USD can be banked, while stablecoins cannot. However, no one forbids moving stablecoins to other exchanges where they can be changed to fiat currency and then withdrawn.

Besides, Binance US in the US is an increasingly less used crypto exchange, so it even makes sense that they would somehow incentivize the use of other exchanges as well. 

It is not crazy to imagine that they want to get out of the US market, which probably causes more problems than benefits. In addition, competition in the US is now very strong, effectively making it impossible for Binance to challenge giants like Coinbase. 

The risk associated with stablecoins

To tell the truth, however, those who withdraw stablecoins and do not exchange them for fiat must take into account that they face an additional risk, related to the issuer of the stablecoin. 

Stablecoins are generally not decentralized cryptocurrencies, but tokens issued by an issuer. Decentralized ones, such as DAI, do not have fiat currencies as collateral, which makes them even riskier. 

For example, last year the Terra/Luna ecosystem, basically based on the UST algorithmic stablecoin, imploded precisely because of the loss of UST’s peg with the dollar due to the rapid loss of value of the collateral (the Luna cryptocurrency). 

However, it should be remembered that there are also other types of stablecoins, such as those collateralized in gold or other assets. 

In this specific case we are talking about stablecoins collateralized in U.S. dollars (USD), and since there is no decentralized system to hold fiat currency all stablecoins collateralized in USD must necessarily be issued by a centralized entity. If that entity performs poorly, or even fails, there is a complete loss of value of the stablecoin. 

For example, in March, when Silicon Valley Bank failed, USDC lost its peg to the dollar, since the issuer of the stablecoin (Circle) held part of the collateral in that very bank. It was enough, however, for the Fed to cover all deposits at the failed banks, thanks to dollars created as needed, for the problem to recede.

Marco Cavicchioli
Marco Cavicchioli
Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".