In light of recent events, we want to ensure that our users fully understand how fiat currencies are protected when deposited on an exchange like Binance.
When everything works as it should, the user experience is simple: you send your fiat currency to a bank account or make a transaction through a service like Open Banking, and it appears in your exchange account balance for you to use as you wish. . However, there are much more operational details going on to make these types of services possible.
In most parts of the world, a special license is required to handle and secure fiat currencies and make digital payments a simple experience for users. Examples of this include Electronic Money Licenses across Europe. When you make an online payment, you interact with service providers who hold such licenses, often without even realizing it. Cryptocurrency exchanges generally do not have these licenses, simply because there are many service providers to work with that do.
What this means in practice is that whenever you deposit fiat currency on Binance or another Exchange, your funds are held and protected by a licensed and regulated third party whose job it is to ensure the security of your money. This fiat balance is reflected and visible in your Binance account and can be used to purchase cryptocurrencies while rest assured that your funds are being held securely.
When you choose to sell cryptocurrency to fiat currency, the partner again handles the fiat currency on your behalf and sends it to your bank account once you initiate the withdrawal. These partners are a key element of what we call fiat inflows and outflows, as they facilitate the purchase of cryptocurrencies with fiat currencies.
Most of the time, these operational details are not important to the user experience (although they are detailed in the Terms and Conditions agreed upon when using trust services for the first time!) However, on rare occasions, this can lead to confusion. about who has your trust funds.
The bottom line is that Binance does not hold users' fiat currency balances. These are always held by regulated partners who work with us to provide fiat currency inflow and outflow services to our users. Despite that, we do everything we can to ensure that our users' funds remain protected at all times.