Binance Explores Partnership with BBVA for Enhanced Crypto Asset Custody Solutions

• Binance is shifting towards traditional finance institutions to enhance customer trust.

• Funds will be stored in BBVA, allowing Binance to accept these as margin for trades.

• This move aims to prevent a repeat of the FTX collapse by ensuring better asset custody.

Binance partners with BBVA to enhance crypto asset custody, allowing customers to store assets securely and reducing exchange risks.

What is the significance of Binance’s partnership with BBVA?

This partnership allows Binance to store customer assets securely at BBVA, enhancing trust and reducing risks associated with holding assets on exchanges.

How does this arrangement work?

Under the new setup, Binance will accept funds stored at BBVA as margin for trades, providing users with a safer alternative for asset management.

Frequently Asked Questions

What are the benefits of using BBVA for asset custody?

Using BBVA allows Binance users to store their assets securely, mitigating risks associated with exchange failures.

How does this affect Binance users?

This partnership provides Binance users with a safer environment for their assets, ensuring they are held in a regulated financial institution.

Key Takeaways

• Enhanced Security: Binance’s partnership with BBVA provides a safer way to store crypto assets.
• Reduced Exchange Risk: Users can mitigate risks associated with holding assets on exchanges.
• Regulatory Compliance: Storing assets in a bank ensures compliance with financial regulations.

Conclusion

Binance’s collaboration with BBVA marks a significant step towards improving asset security for crypto traders. By allowing customers to store their assets in a regulated bank, Binance aims to build trust and prevent incidents similar to the FTX collapse.

Inside sources say Binance is working with Spanish bank BBVA to keep crypto assets off exchanges, allowing customers to store digital assets in the bank instead of the platform.

• Binance has shifted towards the acceptance of TradFi institutions as it attempts to gain a greater foothold with retail clientele.

• Under the new arrangement, Binance will store users’ funds within the bank.

• Binance will accept funds stored within the bank as margin for trades on the exchange.

According to a recent report by the Financial Times, the major crypto exchange has tapped Spain’s third largest bank, Banco Bilbao Vizcaya Argentaria or BBVA, as one of a handful of trusted independent custodians, according to people familiar with the deal.

The arrangement means that traders’ funds will be stored on the Spanish bank in U.S. Treasuries, which Binance then accepts as margin for trades on the exchange.

The move comes as the exchange attempts to take preemptive precautions to ensure that custody arrangements are made so that customers hold less of their assets on exchanges. One of the insiders said the decision was made to mitigate “a hypothetical FTX 2.0.”

Another reason why the exchange wants to partner with more traditional finance entities like banks is to cater to traders’ needs, seeing as some of them prefer to “to use a third party and have the collateral be in a safe place.”

In the past, Binance (BNB) clients could only keep their assets either directly on the platform itself or through a custodian called Ceffu. Ceffu has been described by U.S. officials as a “mysterious Binance-related entity.”

Over the past few months, the crypto exchange has been expanding its network of partners to include banks like Switzerland’s Sygnum and FlowBank as a way to prevent counterparty risks.

Binance wants to prevent an ‘FTX 2.0’

The FTX collapse was largely due to the fact that it did not use third-party custody, a critical safeguard that keeps customer assets separate, independently audited, and under regulatory oversight instead of on exchanges.

Instead, FTX (FTT) held customer funds on its own books, mixing them into its corporate resources, and allowing its sister company, Alameda Research, to access those assets. This lack of separation and oversight enabled massive misappropriation from the earliest days of the exchange until it filed for bankruptcy.

When the exchange collapsed in late 2022, investors were left reeling as their funds were locked in bankruptcy proceedings. Since the FTX incident, more traders have opted for independent custody arrangements so that exchanges do not hold too much of their funds.