Cryptocurrency exchange Binance is reportedly in discussions with large clients regarding the possibility of allowing them to hold trading collateral with banks.
According to sources familiar with the matter, as reported by Bloomberg, Binance is exploring partnerships with Swiss bank FlowBank and Liechtenstein Bank Frick to act as intermediaries. However, it is important to note that this potential innovation will only impact institutional investors and not regular users of the platform.
The proposed business model involves blocking funds in a bank through a tripartite agreement. In return for the blocked collateral, Binance would provide equivalent equity in a stablecoin. The specific stablecoin in question has not been disclosed at this stage. It is worth mentioning that no formal agreements have been reached between the parties involved, which means that the final details of this new service are subject to change.
Bloomberg highlights that Binance previously attempted to reassure its large clients about the security of capital storage through the Ceffu depository. However, it was later revealed in 2022 that the depository was fully owned by Binance’s founder, Changpeng Zhao, according to the company’s declarations.
In late May, Reuters reported, based on anonymous sources, that Binance had commingled its own funds with client funds in 2020 and 2021. The cryptocurrency exchange was allegedly mixing billions of dollars daily in its bank account at the now-collapsed Silvergate Bank. The involvement of Merit Peak, a separate entity believed to be wholly owned by Zhao, was also mentioned in relation to these financial practices. Binance’s Communications Director, Patrick Hillman, vehemently criticized the Reuters article, dismissing it as an unsubstantiated conspiracy.
It is important to monitor the developments surrounding Binance’s discussions with banks and the potential implementation of collateral holding services. Institutional investors will likely benefit from enhanced options for capital storage, provided the necessary agreements and security measures are in place.