The Bitcoin exchange Binance will allow institutional investors to store collateral for leveraged positions off the platform. CoinDesk reports, citing Bloomberg.
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According to the report, collateral stored on cold wallets will be kept using the Binance Custody service. Users’ assets will also be protected from on-chain hacks to which hot wallets are susceptible.
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Thus the exchange seeks to address the trust issue in centralized trading platforms caused by the FTX collapse in November 2022.
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“This is a positive development that signals Binance’s focus on institutional investors. However, this may not be enough, as exchanges will likely have to work with external custodians to fully mitigate the risks around collateral storage,” said Markus Thielen, head of research and strategy at Matrixport’s crypto-lending platform.
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Back in November 2022, Binance launched the Proof-of-Reserves function for Bitcoin holders. The move allowed holders of the first cryptocurrency to verify that the exchange stores their funds in full and that they are fully backed.
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In December, WSJ-polled experts stated alarming signals in Mazars’ report on Binance’s Bitcoin reserves.
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