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Crypto exchange giant Binance is charting a new course in response to heightened concerns over counterparty risk. The exchange is embracing the stability and security of Swiss banking institutions, a move that caters to the demands of its more prominent traders.
This may be a step in the right direction for Binance, which has been restructuring and adapting to global crypto regulations.
Binance Addresses Counterparty Risks With Bank Custody
This pivot allows select traders the option to entrust their assets with renowned Swiss banks, such as Sygnum Bank and Flow Bank. This departs from the previous arrangement where Binance limited clients to storing assets directly on the exchange or with Ceffu, its exclusive institutional custody partner.
According to a recent FT report, one crypto hedge fund manager said they felt better about using a regulated institution:
“I’d much rather park my money with a Swiss bank than Binance.”
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The inclusion of independent banks in the custodial process is a direct response to traders’ preferences for more regulated and secure banking options. This is especially true following the 2022 collapse of FTX, which lost $9 billion in funds.
Binance itself is on thin ice after a massive $2.7 billion dollar fine from the CFTC for derivatives trading violations. The exchange’s former CEO, Changpeng ‘CZ’ Zhao, is still embroiled in a battle with regulators. The court is set to carry out his sentencing in February.
Sygnum Bank Grows
Sygnum Bank, one of Binance’s counterparty custodians, recently had a successful funding round, amassing $40 million. This financial infusion is set to bolster Sygnum’s expansion and innovation, offering sophisticated, regulated products and services.
A press release provided additional details on the usage of the funds:
“Proceeds from this financing round will be used to expand Sygnum’s geographic reach into new markets and accelerate the development of Sygnum’s fully regulated products such as its B2B (bank-to-bank) platform, which now powers the crypto offering of over 15 banks and financial institutions globally.”
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The bank’s growth and focus on secure crypto solutions also align with the market’s direction towards more regulated trading ecosystems.
Binance’s strategy and Sygnum Bank’s growth mirror the crypto sector’s trend towards more regulation, institutional involvement, and security. All in all, these developments signal a maturing market that prioritizes customer protection, compliance, and stability.