Binance Enables Big Traders to Safeguard Assets with Swiss Crypto Custodians, Sygnum Bank, and Flow Bank: FT

Amid rising concerns about asset safety, Binance, the world’s largest crypto exchange, responds by allowing larger traders to use independent custodians, as reported by the Financial Times. This decision comes on the heels of Binance facing regulatory challenges and fines by US authorities last year.

Previously, Binance clients were limited to holding their assets either directly on the exchange or through custodian Ceffu, which raised concerns as US regulators described it as a “mysterious Binance-related entity.” However, in a recent development, Binance has started permitting some larger traders to store their assets with independent banks, including Switzerland’s Sygnum Bank and Flow Bank.

Binance Traders Preferences

The move has been welcomed by traders, with one expressing a preference for parking funds in a Swiss bank, citing a perception of greater safety due to regulatory oversight. Crypto exchange addresses counterparty risk concerns, emphasizing active exploration of a banking triparty solution nearly two years ago.

Binance permits independent custodianship amid rising concerns about leaving assets on exchanges, heightened by FTX’s 2022 collapse and investor fallout.

US authorities’ crackdown on Binance, with a record $4.3 billion fine, intensifies already existing concerns. SEC charges Binance with 13 securities law violations, alleging an “extensive web of deception and conflicts of interest.” Binance is currently contesting these charges.

Regulators worry about exchanges like Binance and Coinbase handling diverse roles—trading, custodial, and lending functions—within the crypto sector. This practice is in contrast to mainstream finance where independent firms typically handle each of these services to reduce risks.

Innovative Solutions to Counterparty Risk

JUST IN: Binance's CEO, Changpeng Zhao, asserts that the company is significantly more robust and far ahead in terms of regulatory compliance. pic.twitter.com/prwb1Tf42I

— Coinwaft (@coinwaft) September 4, 2023

Despite regulatory challenges, traders hesitate to cease Binance trading, valuing its status as the world’s most liquid crypto exchange. Market share dropped from 55% to 30% in the past year, as indicated by CCData, reflecting declining exchange-traded volume

Binance addresses institutional investors’ concerns, partnering with independent banks for customer deposits in US Treasuries, yielding around 4% interest.

Binance targets counterparty risk, implementing a successful risk management solution for industry institutional investors, enhancing scalability and risk management.