The investor can store their collateral at a traditional bank outside of Binance.
To make this possible, a tripartite agreement will be signed.
The Bitcoin (BTC) and cryptocurrency exchange, Binance, has successfully implemented a financial solution aimed at reducing counterparty risk for institutional investors. This was achieved through a tripartite agreement between the exchange, the investor and a bank.
“This solution allows investors to hold trading collateral outside of the exchange in the custody of a banking partner,” Binance explains in a statement release adding: “This is the first of a series of pilot projects initiated by Binancewhich is currently the only cryptocurrency exchange offering such a solution.
It should be clarified that counterparty risk is the risk that the other party to the contract (in this case, a cryptocurrency transaction) will not fulfill its part of the agreement. Anyway, Binance He did not provide further details about the agreement, which he wants to have successfully implemented..
Catherine Chen, Head of VIP and Institutional Customers at Binance, spoke about the incident:
“Counterparty risk has long been a concern for institutional investors across the industry. Our team of cryptocurrency experts and traditional finance experts have been reviewing a three-party banking agreement to address your concerns for over a year. We have developed a solution that allows our institutional clients to optimize their collateral and cryptocurrency investments following the trading behavior of traditional markets. “We are in intensive discussions with a number of banking partners and institutional investors who have also expressed great interest in participating.”
Catherine Chen, Head of VIP and Institutional Clients at Binance.
Although Binance claims to have been working on this for more than a year, it is striking that the announcement comes just days after a new CEO took control of the exchange following sanctions imposed by US state authorities.
As CriptoNoticias reported last week, The new CEO is Richard Teng, a Singaporean with more than 30 years of experience in the financial industry, particularly in the area of legal compliance. This can be understood taking into account the area of expertise of this person Binance forges alliances with traditional financial institutions.