Binance will allow institutional investors to hold collateral for leveraged positions off the platform. This information was published by CoinDesk citing Bloomberg.
According to this information, the Binance Custody service will be used to store collateral in cold wallets. In addition, users’ assets will protect against on-chain hacks that hot wallets are susceptible to.
In this way, the exchange is trying to change the attitude towards exchanges and solve the problem of trust in centralized trading platforms caused by collapse of FTX in November 2022.
“This is a positive development that shows Binance’s focus on institutional investors. However, this may not be enough as exchanges may need to work with external custodians to fully mitigate the risks around holding collateral,” said Markus Thelen, head of research and strategy at cryptolending platform Matrixport.
Prior to this, Binance launched the Proof-of-Reserves function for BTC holders. The decision allowed the owners of the asset to make sure that the exchange keeps their funds in full and all of them are secured.