George Town, Malta, Tuesday, February 13, 2024 – Cryptocurrency exchange Binance recently announced that it would allow larger traders to store their assets at “crypto-friendly” banks like Sygnum and FlowBank in Switzerland. 1
Previously, users were limited to keeping their holdings on the exchange itself or with its custodial partner, Ceffu.
This new policy, formulated during the last quarter of 2023, reportedly targets clients exceeding a certain asset threshold and requires them to undergo additional due diligence.
Initially, they can choose from two Swiss banks known for their expertise in digital assets: Sygnum and FlowBank.
The decision marks a major strategic shift for Binance, which historically held all user assets directly or through Ceffu. However, recent events, including a $4.3 billion fine imposed by U.S. regulators and the dramatic collapse of competitor FTX, have fueled concerns about centralized custody models.
“This solution enables institutional investors to keep trading collateral off-exchange in the custody of a third-party banking partner,” the Binance blog said. 2
“This is the first in a series of pilot projects initiated by Binance, which is currently the only cryptocurrency exchange offering such a solution,” Binance said in its blog in November.
“This arrangement directly tackles the issue of counterparty risk, the primary concern for institutional investors today. It replicates a framework common in traditional financial markets, which enables investors to proportion their crypto-asset allocation based on their risk tolerance. Collateral held with the banking partner can be in the form of fiat equivalents such as Treasury bills, which have the added benefit of being a yielding asset,” it said.
- Binance: https://www.prnewswire.com/news-releases/binance-pilots-banking-triparty-agreement-to-help-institutional-investors-to-manage-counterparty-exposure-302002179.html[↩]
- Binance: https://crypto.news/binance-to-allow-traders-to-store-their-assets-on-external-banks/[↩]
