Binance, the leading global blockchain ecosystem and cryptocurrency exchange, achieved a significant milestone by successfully implementing the world’s first cryptocurrency tripartite agreement with a third-party banking partner on November 30, 2023. This groundbreaking move aims to address institutional investors’ long-standing concerns about counterparty risk, allowing them to store trading collateral under the custody of a trusted banking partner, away from the exchange. Here are the details…
Binance announces innovative third-party agreement
Binance, the worldwide blockchain ecosystem responsible for the largest cryptocurrency exchange in terms of transaction volume, successfully implemented the world’s first cryptocurrency tripartite agreement with a third-party banking partner on November 30, 2023. Institutional investors will now have the option to hold their trading collateral outside the exchange under the custody of a third-party banking partner, the exchange said in the statement. This strategic move directly addresses a long-standing major concern in the industry about counterparty risk, which has prevented institutional investors from fully participating in the cryptocurrency market.
This innovative solution is the first in a series of pilot projects launched by Binance, positioning the platform as the only cryptocurrency exchange to offer such a revolutionary feature. The implementation of the tripartite agreement aims to provide institutional investors with greater confidence in their cryptocurrency investments by reducing counterparty risk through the participation of a reputable banking partner.
The solution of the stock market attracts attention
Catherine Chen, Head of VIP and Corporate at Binance, emphasized the importance of addressing counterparty risk and optimizing collateral for institutional clients. Modeled after traditional market practices, the three-party agreement allows investors to adjust their crypto asset allocations according to their risk tolerance. This marks a crucial step towards bringing cryptocurrency markets into line with the behavior of traditional financial markets.
To further increase the attractiveness of this innovative solution, collateral held with the banking partner may consist of fiat equivalents such as Treasury Bills. This not only addresses counterparty risk but also adds extra value to the solution by providing institutional investors with a yielding asset. It is clearly seen in the ongoing negotiations with potential banking partners and institutional investors that Binance’s tripartite agreement has been positively received in financial circles. Binance’s commitment to addressing institutional investors’ concerns and pioneering innovative solutions points to a promising trajectory for the adoption of this groundbreaking approach in the cryptocurrency industry.
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