The first cryptocurrency triparty agreement in history has been performed successfully by Binance, the global blockchain ecosystem that powers the biggest cryptocurrency exchange based on trading volume, in collaboration with a third-party banking partner.
With this option, institutional investors may retain trade collateral in the custody of a third-party banking partner, off-exchange. This is the first of many initiatives that Binance, the only cryptocurrency exchange that provides this kind of service at the moment, has started.
The main worry for institutional investors nowadays is counterparty risk, which is effectively addressed by this arrangement. It mimics a structure used in conventional financial markets, allowing investors to allocate their crypto assets in accordance with their level of risk tolerance. Treasury Bills, which have the extra advantage of being a yielding asset, are examples of fiat counterpart collateral that may be retained with the banking partner.
Catherine Chen, Head of VIP and Institutional at Binance, stated:
“Counterparty risk has long been a concern of institutional investors across the industry. Our team, of crypto natives and traditional finance professionals, has been exploring a banking triparty agreement for more than a year to address their concern. 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.”
