• Leading cryptocurrency exchange, Binance, launches a promising pilot program designed to serve institutional players. 

• Targeted at solving counterparty risks, the program is helping to bridge the gap between the traditional market and the crypto market. 

Unfazed by the current situation in its ecosystem, the Binance exchange remains committed to strengthening its position as a leading global exchange.

On the 30th of November, Binance announced the launch of a pilot program. The new development will allow for more flexibility in the trading scene for specific Binance users. Courtesy of the program launch, traditional banks will have the ability to store trading collateral outside cryptocurrency exchanges.

Unlike the pattern that regular traders and investors take to invest and safeguard funds directly on the exchange, institutions can trust external banks to serve as an alternative and help safeguard their collaterals.

At the core of this approach is a goal to boost security for some of its biggest clients. As the exchange stated, the program is designed to tackle security issues by bringing counterparty risks to the lowest levels.

As the announcement explains;

This arrangement directly tackles the issue of counterparty risk, the primary concern for institutional investors today. It replicates a framework common in traditional financial markets, which enables investors to proportion their crypto-asset allocation based on their risk tolerance.

Notably, institutional players can hold a variety of collaterals with the exchange’s banking partners. This can be in fiat format or its equivalents like Treasury Bills. Institutions holding treasury bills stand to benefit from their holdings as treasury bills can become a yielding asset.

International Institutional investment to benefit from Binance’s pilot program

Catherine Chen, the Head of VIP and Institutional at Binance amplified the underlying issues that birthed this solution. Chen explains that counterparty risk has long been a long-standing concern for institutional investors in and out of the crypto space.

In a bid to address these concerns, the team at Binance has been working closely with traditional finance experts to explore a banking triparty agreement for more than a year.

We’ve developed a solution that ensures our institutional clients can optimize their collateral and cryptocurrency investments, modeled after the traditional markets’ trading conduct. We are in close discussions with an array of banking partners and institutional investors who have also expressed strong interest in participating.

The pilot position sets Binance apart from other exchanges, as it becomes the first and only cryptocurrency exchange to design and offer a triparty solution. Not only does the program help to increase investors’ trust in the exchange, but it also attempts to bridge crypto market opportunities with traditional financial risk controls, as the announcement observed.

In the long term, other exchanges could follow in Binance’s steps as the program promises to open the pathway for international institutional investment.