Binance Adapts to Market Demands for Independent Custody

Binance, the world's leading crypto exchange, has started allowing key traders to maintain their assets with independent custodians, according to a report in The Financial Times. This decision comes amidst rising concerns about asset safety on the platform, especially in the wake of a substantial fine imposed by US authorities on Binance for regulatory violations.

Binance is now allowing some of its larger traders to keep their assets with independent banks, such as Switzerland's Sygnum Bank and Flow Bank. Traditionally, Binance clients had their assets either on the exchange or with Ceffu, Binance's dedicated custodian.

The new custody arrangement proposed by Binance involves allowing customers to deposit capital in US Treasuries at these custodian banks, which not only secures assets but also provides an interest return in the current high-interest rate environment.

Traders the FT spoke to expressed more confidence in Swiss banks for asset custody, citing better regulatory oversight.

The collapse of FTX and recent crackdown on Binance by US authorities have heightened worries about keeping money on exchanges. Binance's $4.3 billion fine for money laundering and financial sanctions breaches has particularly fueled these concerns.

The Securities and Exchange Commission (SEC) has added to the pressure, charging Binance with a slew of securities law violations, pointing to an intricate web of deceptive practices and conflicts of interest. In response to the heightened scrutiny, traders are increasingly favoring banking institutions with stringent regulatory oversight for their asset custody.