Binance Introduces Crypto Triparty Agreement
Binance has launched the world’s first crypto triparty agreement with a third-party banking partner, aimed at managing counterparty risk. This unique initiative allows institutional clients to deposit collateral with a banking partner in the form of fiat. The move is a response to concerns among institutional investors who want to retain control over their capital while trading on the exchange.
Addressing Institutional Investors’ Concerns
Binance announced the successful pilot of the triparty agreement in a press release. The initiative enables institutional investors to trade collateral off-exchange while keeping it under the custody of a third-party banking partner. The exchange explained that this solution replicates the risk management framework of traditional finance, with fiat or fiat equivalent trading collateral pledged to banking custodians.
Optimizing Collateral and Investments
According to Binance, counterparty risk is a major concern for institutional investors, especially after the collapse of centralised crypto firms like FTX in 2022. To address this issue, Binance has been developing a banking triparty agreement for over a year. The agreement allows institutional clients to hold collateral in the form of fiat equivalents, such as Treasury Bills, which offer the additional benefit of being yielding assets.
Binance’s Continued Innovation Despite Recent Challenges
Despite recent challenges, including a hefty fine and CEO Changpeng Zhao stepping down, Binance remains committed to innovative projects. The triparty agreement announcement follows the exchange’s settlement with the Department of Justice. Richard Teng has been appointed as Binance’s new CEO.
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