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This new pilot project from Binance addresses the paramount concern of counterparty risk, while aligning with the risk tolerance of institutional investors.
In a groundbreaking move, Binance has accomplished the world’s inaugural cryptocurrency triparty arrangement in collaboration with an undisclosed banking partner, on Thursday, November 30. This pioneering development introduces a unique solution within the crypto space, mirroring traditional financial structures and strategically tailored to meet the requirements of institutional investors.
Binance has embarked on a series of pilot projects, introducing a groundbreaking solution not offered by any other cryptocurrency exchange. This initiative directly addresses the paramount concern of counterparty risk, while aligning with the risk tolerance of institutional investors.
The model mirrors traditional financial frameworks, allowing investors to allocate their crypto assets accordingly. Collateral, in the form of yielding assets like Treasury Bills, can be securely held with the banking partner, adding an extra layer of stability to the arrangement. Catherine Chen, Head of VIP and Institutional at Binance, said:
“Counterparty risk has long been a concern of institutional investors across the industry. Our team, of crypto natives and traditional finance professionals, has been exploring a banking triparty agreement for more than a year to address their concern. We’ve developed a solution that ensures our institutional clients can optimize their collateral and cryptocurrency investments, modeled after the traditional markets’ trading conduct. We are in close discussions with an array of banking partners and institutional investors who have also expressed strong interest in participating.”
Binance Under Regulatory Trouble
The latest development comes at a time when Binance has been facing major regulatory challenges and a whopping $4.3 billion settlement with the US regulators. The ex-CEO of Binance admitted guilt in connection to money laundering violations. Moreover, he is likely to confront a potential prison sentence of up to 18 months as part of the negotiated agreement with the US government.
Changpeng Zhao (CZ), the founder and former CEO of Binance, the world’s largest cryptocurrency exchange, has enlisted the services of Matthew Diggs, a former US prosecutor with extensive criminal and regulatory expertise, to advocate for his interests in the ongoing legal settlement with the government.
Binance is facing trouble not only in the US but also in the overseas market as well. The Philippine Securities and Exchange Commission (SEC) has intensified its regulatory efforts against the prominent global cryptocurrency trading platform recently. The SEC alleges that Binance is operating unlawfully in the country without the necessary licenses.
In an official notice, the Philippine SEC explicitly declared that Binance lacks official authorization to offer investments or securities to the general public in the country. The action against the exchange is part of the regulatory agency’s broader initiative to identify unregistered cryptocurrency firms and collaborate to restrict access to their platforms.