On the Role of Binance's Fiat Partners in Safeguarding Users’ Fiat Funds
In light of recent events, we want to ensure our users fully understand how fiat currencies are safeguarded when deposited to an exchange like Binance.
When things are working as they should, the user experience is straightforward: you send your fiat 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 see fit. However, there is a lot more going on behind the scenes to make these kinds of services possible.
In most parts of the world, a special license is required to handle and safeguard fiat currencies to make digital payments a straightforward experience for users. Examples include E-Money Licenses across Europe. When you make an online payment, you interact with service providers holding such licenses, often without even realizing it. Crypto exchanges don’t typically hold these licenses, simply because there are plenty of service providers to work with that do.
What this means in practice is that whenever you deposit fiat to Binance or another exchange, your funds are held and safeguarded by a licensed and regulated third party whose job is to ensure the safety of your fiat. This fiat balance is then reflected and is visible in your Binance account and can be used to purchase crypto while you have the assurance your funds are being safely held.
When you choose to sell crypto to fiat, the partner once again handles the fiat currency on your behalf and sends it to your bank account once you initiate withdrawal. These partners are a key element of what we refer to as fiat on- and off-ramps as they make it easy to buy crypto with fiat currencies.
Most of the time, these behind-the-scenes details are unimportant to the user experience (although spelled out in the Terms and Conditions agreed to when using fiat services for the first time!) However, on rare occasions, this can lead to confusion about who has your fiat funds.
The bottom line is that Binance does not hold users’ fiat currency balances. These are always held by regulated partners that work with us to provide fiat on- and off-ramp services to our users. Despite that, we do everything we can to ensure our users' funds remain protected at all times.