Binance Lets Traders Keep Collateral Off-Chain Amid FTX Collapse Concerns
Per Bloomberg
After the collapse of FTX and the bankruptcy of multiple crypto firms, Binance has decided to make a move to put traders at ease. The crypto exchange now allows firms to leave their collateral in cold storage.
After FTX's collapse, multiple crypto firms have been declaring bankruptcy or at least downsizing their headcount. Just recently, Crypto.com decided to slash its workforce by 20%, citing how the trust in the industry has been damaged.
Binance, the now largest crypto exchange in the world, will allow institutional investors to keep collateral off the chain. This means their leveraged positions could be stored with Binance Custody.
Binance Custody is a crypto exchange service that keeps assets in cold storage. This means that the wallets holding these assets are not connected to the internet and will reportedly be made available for institutional investors.
How this would work is when traders place a leveraged position with Binance Custody, their assets would be taken off the chain. Once the trade has been settled, the assets would then be taken on the chain again for the traders to access.
Binance Custody was launched in 2021 and registered in Lithuania. The company highlights that this is a separate legal entity, and now, they are using it to help ensure traders that their assets are off the chain in case a situation like FTX happens.
Binance head of VIP & Institutional, Catherine Chen, gave a statement regarding how traders are looking for solutions to handle on-chain risks. Chen shares how risk control is now being prioritized.
Chen: "... They are getting ‘pressure’ from their internal risk control. For them to scale up further activities on Binance, they need to look for ways to help them diversify the on-exchange risks."
While the trial of Sam Bankman-Fried is still ongoing, the disgraced founder of FTX maintains that he did not steal customer funds. This statement was given shortly after lawyers recovered at least $5 billion in liquid assets.
See flow at unusualwhales.com/flow.
Other News:
- Crypto.com to Slash 20% Of Workforce Citing How the FTX Collapse Damaged Industry Trust
- SBF Maintains that He 'Didn't Steal Funds' Days After Lawyers Recovered at Least $5 Billion
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