Binance unveiled a new program that lets institutions trade without depositing to the exchange.
Crypto exchange Binance launched a pilot program that allows banks to store trading collateral off-exchange, according to a Nov.
According to the announcement, the program allows institutions to hold collateral at a third-party bank instead of depositing it on the exchange.
According to Binance executive Catherine Chen, the exchange has been developing the program for at least a year and plans to expand the program even more in the future, as she stated:
“Counterparty risk has long been a concern of institutional investors across the industry. Our team of crypto natives and traditional finance professionals has been exploring a banking triparty agreement for more than a year to address their concern [...] We are in close discussions with an array of banking partners and institutional investors who have also expressed strong interest in participating.”
Counterparty risk is defined as “the likelihood or probability that one of those involved in a transaction might default on its contractual obligation,” according to Investopedia.
Binance isn’t the only exchange that has sought to solve this problem. 28, crypto exchange Deribit teamed up with MPC wallet provider Fireblocks to create a cryptographic system that also allows traders to perform swaps without depositing on the exchange.
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