Will customers' collateral soon be deposited with banks?

Investors demand protection for their deposits. Will institutional traders soon be able to have a bank hold their collateral on Binance?

According to Bloomberg the world's largest crypto exchange Binance is currently looking at the possibility of allowing certain institutional customers to hold their trade collateral at a bank rather than on the crypto platform. In doing so, the company hopes to reduce counterparty risk. According to the report, Switzerland-based FlowBank and Liechtenstein-based Bank Frick have been mentioned as potential facilitators for the service.

Bloomberg refers to "people familiar with the matter." They said representatives of Binance held talks with selected professional customers. The subject was the introduction of a system that would allow them to use bank deposits as collateral for margin trading in both the spot and derivatives markets.

Under the proposal, funds held at the bank by customers would be backed by a tripartite agreement, while Binance would provide stablecoins as collateral for margin trading.

According to Bloomberg, the proposed plan is still under discussion and may be subject to possible changes. After the collapse of FTX in November, investors demand stricter security measures from crypto exchanges.