Binance announced that it has successfully completed the world's first cryptocurrency tri-party agreement with a third-party banking partner.
This innovative decision addresses the significant issue of counterparty risk by allowing institutional investors to trade over-the-counter (OTC) collateral under the supervision of a third-party banking partner.
Binance's new solution claims to directly address this problem by replicating a framework common in traditional financial markets. In this way, investors will be able to determine their crypto asset allocations according to their risk tolerance. It is noteworthy that Binance is currently the only cryptocurrency exchange that offers such a solution.
According to the statement, the third-party banking partner plays an important role in this arrangement by keeping the trading collateral off-exchange. This collateral may be in the form of fiat equivalents, such as Treasury Bills, which also generate yield.
Binance VIP and Corporate President Catherine Chen expressed her views on the new solution:
“Counterparty risk has long been a concern of institutional investors in the industry. Our team of cryptocurrency industry companies and traditional finance experts has been investigating the banking tripartite agreement for over a year to address these concerns. We have developed a solution that models the trading behavior of traditional markets, enabling our institutional clients to optimize their collateral and cryptocurrency investments. “We are also in close discussions with a number of banking partners and institutional investors who have shown keen interest in participating.”
*This is not investment advice.