Binance is reportedly exploring the possibility of having some institutional clients deposit trade collateral for spot and derivatives margin trading with banks. bloomberg.
The exchange is reportedly in talks with several institutional clients to enable bank-held collateral deposits, with Switzerland-based Flowbank and Liechtenstein-based, according to Bloomberg sources. Bank Flick is cited as a potential intermediary for the service.
Binance, the world’s largest cryptocurrency, has yet to finalize the proposal, and the deal is still subject to change. The banks have not commented on the reported proposal.
According to Bloomberg sources, a version of Binance’s proposal would involve locking customer cash in banks through a tripartite arrangement, exchanges lending stablecoins as collateral for margin trading, and Binance transferring that deposit amount to the money market. It is about investing in a fund and earning interest. Compensation for lending stablecoins is similar.
Unlike registered broker-dealers, cryptocurrency exchanges not only facilitate trading, but also store assets, settle trades, and provide credit. The move will decouple these practices to some extent.
Binance CEO Changpeng Chao said in an interview on May 29 that Binance had considered buying the bank, but was dissuaded by risks, underperforming returns and extensive rules and regulations.
The move comes as exchanges face pressure to guarantee their safety in the event of a possible bankruptcy, with FTX’s sudden collapse late last year prompting funds on deposit. The problem became more pronounced after .
Enhanced monitoring
Exchange’s move will bring it closer to US registered broker-dealer requirements Regulators have been increasing pressure on Binance for several years.
Most recently, the company came under investigation by the Department of Justice for allegedly evading sanctions imposed on Russia and its citizens. Binance has denied these allegations. Binance has been the subject of anti-money laundering investigations in the US since at least 2020.
According to a Reuters report on December 12, 2022, Justice Department officials are actively debating whether to file charges against Binance or its executives for alleged money laundering and criminal sanctions evasion. Binance denied the allegations, claiming in a tweet that Reuters was “wrong again.”
