Binance has launched a solution that will enable institutional investors to hold their collateral for leveraged positions off the exchange.
Binance Custody, the institutional digital asset custody arm of the exchange, has officially announced the launch of Binance Mirror on its blog. Institutional investors can now use this “off-exchange crypto settlement solution” to store their backing assets while making leveraged investments on the exchange.
Institutions must first pledge a certain amount from their Qualified Wallet, which is a cold storage solution provided by Binance Custody. With Binance Mirror, this amount is then reflected in the user’s exchange account on a 1:1 balance. The mirror position can be closed at any time, but as long as it remains open, the assets remain secure in a separate cold wallet.
Binance Welcomes Institutions
Although only now officially launching, Mirror adoption by institutional investors is set to increase in the last quarter of 2022. During that period, the exchange saw a 67% increase in assets reflected from Binance Custody. According to the exchange, more than 60% of all assets in Binance Custody are held in mirror accounts.
Binance believes this indicates growing institutional confidence in the off-exchange solution of its custodial arm. Binance’s institutional arm said that new customer additions in the fourth quarter were up about 17.4% compared to the previous quarter.
According to the Head of VIP and Institutional at Binance, clients have become more aware of risk management. Although satisfied with their experience with the Exchange, many clients also report facing “pressure” from their internal risk controls. To increase their usage, the world’s largest exchange is working to diversify on-exchange exposure.
The development comes as the Securities and Exchange Commission of Thailand published new regulations stipulating that virtual asset providers introduce digital wallet management systems to ensure custody is secure. Custodians of digital currencies have six months to comply with the new rules.
raised risk perception
Crypto exchanges have largely had to manage their customers’ perceptions of risk sharply following the collapse of FTX. Since FTX declared bankruptcy following a liquidity crush, other exchanges have been scrambling to assure customers that their assets are safe.
Despite waves of proof of reserves, exchanges have seen withdrawals continue to bleed them. The world’s largest exchange saw withdrawals of more than a billion dollars in a single day in early December. Nevertheless, Binance intends to continue expanding, despite losing accounting firm Mazar for its Proof of Reserves report.
BeInCrypto has reached out to the company or the person involved in the story for an official statement regarding the recent development, but has yet to hear back.