tinytest | A tiny unit-testing framework for C | Assertion library

This behavior isn't unexpected, it is documented that all objects derived from IOBase iterate over lines. The only thing that changes between binary vs text mode is how a line terminator is defined, it is always defined as b"\n" in binary mode.

The docs:

IOBase (and its subclasses) supports the iterator protocol, meaning that an IOBase object can be iterated over yielding the lines in a stream. Lines are defined slightly differently depending on whether the stream is a binary stream (yielding bytes), or a text stream (yielding character strings). See readline() below.

The problem is that there used to historically be ambiguity between text and binary data in the type system, this was a major motivating factor of the Python 2 -> 3 transition breaking backwards-compatibility.

I think it would certainly be reasonable to have the iterator protocol respect the buffer size for file objects opened in binary mode in Python 3. Why it was decided to keep the old behavior is something I can only speculate about.

In any case, you should just define your own iterator, that is common in Python. Iterators are a basic building block, like built-in types.

You can actually use the 2-argument iter(callable, sentinel) form to construct a super basic wrapper: