The world’s largest crypto exchange Binance plans to allow institutional investors keep collateral for leveraged positions off the crypto exchange. It will help Binance regain institutional investors’ confidence in the crypto exchange and the crypto market.
Institutional investors will have the option to post collateral with Binance Custody. As per the exchange, Binance Custody, an institutional-grade digital asset solutions platform, safeguards investors’ crypto holdings.
Binance Allows Institutional Investors Keep Collateral Off Exchange
Institutional investors’ confidence was hammered due to the collapse of crypto exchange FTX. Sam Bankman-Fried appropriated customer funds through his crypto exchange FTX and trading firm Alameda Research causing the crypto market to crash further and investors to move away from the market.
Binance felt the impact on its products designed particularly for institutional investors. Moreover, institutional investors have not returned despite the latest rally in the crypto market.
Binance plans to allow institutional investors to keep the collateral for leveraged positions directly on Binance Custody. Crypto assets are kept held in cold wallets. Assets will become available for users once the trades are settled. Therefore, it will enable users to secure their crypto assets from hacks and exchange outflows during volatile market conditions.
“Our clients are a lot more conscious of managing risks. We hear from our users that they love to trade on Binance, but at the same time 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,” said Catherine Chen, the head of VIP & Institutional at Binance.
Crypto exchanges need to work with external custodians to eliminate risks related to collateral ownership. Moreover, crypto regulations will help bring back institutional investors to the crypto market and introduce products to safeguard other investors and companies.
Also Read: Failed 3AC Founders To Launch Crypto Exchange GTX
Can Other Crypto Exchanges Follow?
Binance being the largest crypto exchange is not just followed by crypto investors, but also by crypto exchanges. Other crypto exchanges may also follow suit and help bring back institutional investors to the crypto market.
Bitcoin saw an over 20% rally in the last 24 hours, but data suggest a lack of institutional participation in the crypto rally. Also, experts believe a recovery in the crypto market to $65K this year amid several events such as the Fed pivot. However, the recovery may not sustain without institutional investors’ participation.
Also Read: Possibilities of Bitcoin Price Hitting $65K With This Rally