Business News Report
January 30, 2024

Binance Allows Large Traders to Store Assets in Independent Banks 

Binance Allows Large Traders to Store Assets in Independent Banks 

Cryptocurrency exchange Binance reportedly permitted large traders to keep their assets at autonomous banks, including crypto-friendly institutions Sygnum or FlowBank in Switzerland. This decision comes in response to customer demands for the option to entrust their assets to an independent custodian. 

Previously, traders were obligated to retain their assets either directly on the exchange or with its custodial partner, Ceffu–the only institutional custody partner of Binance.  

Leading cryptocurrency exchanges including Binance and Coinbase, have expanded their market shares by undertaking various roles concurrently, encompassing those of a trading venue, custodian, and lender. This has raised concerns among regulators. In traditional finance, distinct and independent firms provide these services separately to minimize risks. 

Custodian banks operate by securely holding the assets of their clients. This shift in the cryptocurrency space challenges the conventional separation of financial functions, prompting regulatory scrutiny to ensure the integrity and security of these multifaceted services.

Binance initiated the development of a banking triparty solution last year in advance of the increased prominence of counterparty risk, explicitly involving an arrangement between Binance, its customers, and a bank custodian. However, the exchange did not reveal the identities of the banks involved.

Binance Adapts to User Concerns

The decision to allow users to hold their assets with independent banks might indicate heightened concerns among users, prompted by the collapse of Binance’s competitor, FTX, in 2022 and the current regulatory challenges faced by Binance in the United States.

Last year, the United States Treasury and Department of Justice jointly imposed a record $4.3 billion fine on Binance following the exchange’s guilty plea to criminal charges related to money laundering and violations of international financial sanctions.

The US Securities and Exchange Commission (SEC) has further charged Binance with 13 securities law violations, alleging the involvement in an “extensive web of deception and conflicts of interest.” The collective impact of these events has contributed to traders’ concerns about the security and regulatory standing of the exchange.

Recently, Binance appeared before the US SEC, seeking to have a lawsuit filed by the regulator dismissed. 

Amid evolving practices and regulatory challenges, Binance has allowed large traders to use autonomous banks, reflecting a response to user demands for independent custodianship and the company’s commitment to enhancing user security in the dynamic cryptocurrency landscape. 

Disclaimer

In line with the Trust Project guidelines, please note that the information provided on this page is not intended to be and should not be interpreted as legal, tax, investment, financial, or any other form of advice. It is important to only invest what you can afford to lose and to seek independent financial advice if you have any doubts. For further information, we suggest referring to the terms and conditions as well as the help and support pages provided by the issuer or advertiser. MetaversePost is committed to accurate, unbiased reporting, but market conditions are subject to change without notice.

About The Author

Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at [email protected]

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Alisa Davidson
Alisa Davidson

Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at [email protected]

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