Cryptocurrency exchange Binance is considering a proposal to allow some institutional clients to keep collateral in a bank rather than on the platform, which could help reduce counterparty risk.
People familiar with the matter said Binance has discussed the issue with some of its professional clients. The proposal would allow them to use bank deposits as collateral for spot and futures trading. Also, individuals who asked not to be named said that Swiss FlowBank and Liechtenstein’s Bank Frick were mentioned as potential intermediaries for this service.
In addition, some details of the offer are known. Binance has been discussing that client assets in the bank would be blocked as part of a trilateral agreement, and the exchange would provide them with stabelcoins as collateral for margin trading. The money held in the bank could be invested in funds to earn interest, offsetting expenses.
A Binance spokesman declined to comment, as did Bank Frick. The latter cited bank secrecy laws. FlowBank said its license does not include cryptocurrency trading and did not disclose any arrangement with Binance. According to sources, the proposed scheme is still being refined and may undergo changes. Binance has seen its market share shrink since the zero-commission action was terminated in March, and a lawsuit filed by the CFTC against it has caused concern among some traders. According to CCData, its share of spot volume fell from 63% in February to 44% in early May, and its share of derivatives fell from 77% in March to 66% last week.