Disclaimer: Information found on CryptoreNews is those of writers quoted. It does not represent the opinions of CryptoreNews on whether to sell, buy or hold any investments. You are advised to conduct your own research before making any investment decisions. Use provided information at your own risk.
CryptoreNews covers fintech, blockchain and Bitcoin bringing you the latest crypto news and analyses on the future of money.
Binance is reportedly reviewing a proposal to provide its institutional clients with the option to secure their collateral outside the cryptocurrency exchange to mitigate counterparty risk.
This initiative arises amid increasing demands from institutional digital asset traders for essential changes following the significant losses incurred from FTX’s abrupt collapse late last year.
Mitigating Counterparty Risk
As per unnamed sources acquainted with the situation, Binance is engaging in discussions with certain professional clients regarding a framework that would allow them to utilize bank deposits as collateral for margin trading in both spot and derivatives markets.
Two potential intermediaries have been identified – FlowBank, based in Switzerland, and Bank Frick, located in Liechtenstein – although further details regarding the discussions remain confidential. Both financial institutions have chosen not to comment on the arrangement.
Bank Frick, for instance, referenced banking secrecy regulations and opted not to provide any remarks. Conversely, FlowBank stated that its license does not extend to cryptocurrency trading.
ADVERTISEMENT
Related Posts
The suggested arrangement has yet to be finalized and may undergo changes. One version of the proposal involves securing clients’ funds at the bank through a tri-party agreement while Binance provides them with stablecoins to act as collateral for margin trading.
In the meantime, the cash held at the bank could be allocated to money-market funds, allowing clients to earn interest and offset the borrowing costs from the cryptocurrency exchange.
Regulatory Pressure on Binance
This development occurs against a backdrop of heightened regulatory scrutiny of Binance in recent months. The collapse of FTX triggered a crackdown on the asset class, with Binance at the center of a coordinated effort by U.S. financial regulators, including the Department of Justice (DOJ), the Securities and Exchange Commission (SEC), and the New York Department of Financial Services (NYDFS).
Additionally, Binance faced rejection from Australian banks and fiat service providers this year. The cryptocurrency exchange has encountered difficulties with regulators after its derivatives license was revoked by the Australian Securities and Investments Commission (ASIC) due to allegations of misleading practices and enabling retail investors in the country.
Binance’s Australian division informed users of the suspension of Australian dollar services on May 18th after its domestic payment service provider, Zepto, was directed to cease support for the exchange. Following this, traders hurried to liquidate their cryptocurrency holdings before local banks halted withdrawals, resulting in Bitcoin trading at a significant discount on the platform.
SPECIAL OFFER (Sponsored) Binance Free $100 (Exclusive): Use this link to register and receive $100 free and 10% off fees on Binance Futures first month (terms).
PrimeXBT Special Offer: Use this link to register & enter CRYPTOPOTATO50 code to receive up to $7,000 on your deposits.
