Binance will allow institutional investors to keep their collateralized crypto used for leveraged positions, off the platform.
The exchange will enable investors to post collateral with Binance Custody, which will hold the assets off the internet, in cold storage wallets, Binance said in a statement on Monday. Once trades are settled, the assets would then become accessible to the user again.
The feature, called Binance Mirror, could be a major blessing for crypto investors trading in the leveraged markets as most crypto traders have to keep their collateral on the exchange for trading. However, using cold storage wallets means users can continue to trade crypto during volatile sessions without massive outflows on an exchange.
Users' assets would also be protected against on-chain hacks, to which hot wallets are vulnerable.
"This an exercise to build trust among institutions that their funds will remain safe. Its a positive development that shows Binance is moving toward becoming an institutional-focused crypto exchange," said Markus Thielen, head of research and strategy at crypto services provider Matrixport.
"However, this might not be enough as exchanges will likely have to work with external custodians to completely eliminate risks around collateral ownership," Thielen added.
The news was reported earlier by Bloomberg.
UPDATE (Jan. 16, 12:44 UTC): Adds additional detail and context throughout. Adds comment from Matrixport.
UPDATE (Jan. 16, 15:42 UTC): Adds link to Binance announcement and removes Bloomberg references from headline and text.
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.