Fiat on Binance insured by FSCS?

Hello,
I was wondering, with all the issues binance are having currently with Faster payments (UK) and SEPA (eur) withdrawals, in the event of the exchange going down, wouldn't the fiat held in the exchange be FSCS (UK) insured?
As far as I know, crypto exchanges can't hold themselves fiat, they need to have it in regular bank accounts in the country of the Fiat and those banks need to be regulated by the FSCS by law, so I would have thought, in the unlikely event of an exit scam, bankruptcy, etc...you would lose all the crypto held by the exchange as it is not legal tender but the fiat should remain intact in the bank account. Am I missing something?

Also, in binance when using binance earn on fiat, are you converting it to some kind of stable coin? I haven't found any information about this and by the look of the UI it seems you are earning interest over the fiat directly...maybe some of you can help shed some light on this subject.

Thanks