Binance has announced a first-of-its-kind cryptocurrency triparty agreement with a third-party banking partner that would present institutional investors with the opportunity to interact with the market; to hold trading collateral off-exchange in the custody of a banking partner.
Binance has successfully executed the triparty arrangement, making it the only cryptocurrency exchange currently offering this service. This marks the first of several pilots initiated by the exchange.
With this arrangement, Binance aims to solve the primary challenge institutional investors are faced with, which is counterparty risk. Head of VIP and Institutional at Binance, Catherine Chen on the counterparty risk said it has been a concern for institutional investors across the industry.
Binance’s Catherine Chen also mentioned that the exchange team and traditional finance professionals have been looking at a banking triparty agreement for over a year. Exploring this path she is aimed to address the concern of institutional investors.
This arrangement, however, mirrors a common framework in the conventional financial industry taking into consideration the risk tolerance of institutional investors. “We’ve developed a solution that ensures our institutional clients can optimize their collateral and cryptocurrency investments, modeled after the traditional markets’ trading conduct,” Catherine Chen said.
Further, the collateral held with the banking partner can be in the form of fiat, like asset yield Treasury Bills.
Moreover, the Head of VIP and Institutional disclosed discussions are ongoing to onboard banking partners and institutional investors who have shown interest in participating.
While this is a milestone for Binance, the exchange and its former CEO Changpeng Zhao have been in crosshairs with regulators all over the world resulting in the CEO stepping down from the firm as part of a settlement agreement including the payment of a personal fine of $50M and $4.3B for the company. As a result, Richard Teng has been named the new CEO of the exchange.
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