Read this if you move U.S. dollars to or from your Binance account.
- Binance will temporarily halt U.S. dollar withdrawals and deposits from Feb. 8, but Binance.US users will not be affected as this is a separate entity.
- Binance says it is looking for a solution, but has not said why it is making the move.
- As a crypto investor, storing your assets in a non-custodial crypto wallet means your exchange can’t stop you from accessing your crypto.
Binance will temporarily suspend U.S. dollar withdrawals and deposits, starting on Feb. 8. The popular crypto exchange, which has not given a reason for the suspension, says it is looking for a solution. According to a company tweet, “Only a small proportion of our users will be impacted by this and we are working hard to restart the service as soon as possible.” It added, “All other methods of buying and selling crypto remain unaffected.”
It’s worth noting that Binance.US is a separate entity which says it won’t be affected. As American customers cannot use the international platform they should not be impacted. “We are NOT suspending $USD withdrawals & deposits on February 8,” tweeted Binance.US customer support.
Binance’s suspension of U.S. dollar transfers
If you’re a Binance user, any headline that mentions suspending withdrawals is likely alarming. The crypto community is still on edge after the recent collapse of FTX and other crypto platforms. Billions of dollars’ worth of FTX customer funds are missing or tied up in the legal fallout.
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Binance CEO Changpeng Zhao, also known as CZ, sought to reassure users by saying that only 0.01% of its monthly active users use U.S. dollar bank transfers. But it would be more reassuring if the company was transparent about why it is making the move. Any hint of issues with accessing customer money triggers alarm bells, even if it’s only withdrawals in one currency.
It’s not the first time Binance has suspended withdrawals and deposits for particular currencies. In the summer of 2021, it had to halt British pound withdrawals and deposits for UK customers, following issues with the country’s Financial Conduct Authority (FCA). While it did eventually resume the service, the episode spooked British crypto investors.
Since then, Binance has attempted to stay on the right side of regulators by increasing its compliance team and stepping up its anti-money laundering and other anti-crime activities. However, according to Reuters, in December 2022 U.S. authorities were considering bringing money laundering charges against the exchange. Binance dismissed the Reuters report as “wildly outdated” and “incorrect” and told Fortune that its top priority is user protection.
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How to protect your crypto assets
The good news is that Binance’s move to suspend U.S. dollar withdrawals has been telegraphed in advance, so customers have time to prepare. In addition, it says withdrawals and deposits in other currencies won’t be affected. Another reason the impact will probably be minimal is that American customers, who likely make the majority of U.S. transactions, can only use the Binance.US platform.
All the same, it’s important to be cautious. Particularly because we don’t know why Binance is restricting U.S. dollar activity. It could be because of an issue with a specific banking partner, as Bloomberg suggests, but there could be something bigger at play.
To be clear, it’s unlikely this is the beginning of something more serious and it’s unlikely it will impact Binance.US customers further down the road. Unfortunately, it is hard to be 100% sure because trust in centralized crypto exchanges is extremely low. Bear in mind that in the days prior to FTX’s collapse, the company assured its customers funds were safe.
As a crypto investor, the only surefire way to protect your assets is to move them into a crypto wallet you control. Known as non-custodial wallets, you’ll need a bit more crypto know-how to set one up and get confident with moving your assets around. You will also be totally responsible for its security, so don’t lose your security phrase. There are billions of dollars of Bitcoin (BTC) stuck in crypto wallets that people can’t get to because they’ve forgotten the password.
The temptation to leave your crypto in a custodial wallet on the platform where you bought it is understandable, and it does offer some advantages. For starters, crypto exchanges are much more user-friendly. The fees are easy to understand. And if you lose your password, you’ll be able to recover it without too much hassle. Finally, many exchanges make it straightforward to stake your crypto and earn rewards.
The big downside is that there’s very little in the way of investor protection. Unlike banks, crypto assets on exchanges aren’t protected against failure by FDIC insurance, so your money could get swallowed up in any bankruptcy proceedings. This is the main reason to learn about non-custodial wallets. If your exchange fails, gets hacked, or is forced to suspend withdrawals for another reason, crypto that’s held in an external crypto wallet won’t be affected.
Binance’s planned suspension of U.S. dollar withdrawals is almost certainly a temporary issue. However, it’s not surprising that crypto investors are nervous. Whether it’s Binance or another crypto exchange, if you keep your assets in a custodial wallet, they could be at risk in the event of platform failure or get stuck if the exchange freezes withdrawals.
Given that one of the big advantages of crypto is that you don’t have to rely on centralized platforms, it’s worth looking into alternative ways to store your crypto.