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Binance will allow institutional investors to keep their collateralized crypto used for leveraged positions off the platform, Bloomberg reported on Monday.
The exchange will let investors to post collateral with Binance Custody, which will hold the assets off the internet in cold storage wallets, the report added. Once trades are settled, the assets would then become accessible to the user again.
The feature will be a major blessing for crypto investors trading in the leveraged markets as most crypto traders have to keep their collateral on the exchange for trading. However, using cold storage wallets means users can continue to trade crypto during volatile sessions without massive outflows on an exchange.
Users’ assets would also be protected against on-chain hacks, to which hot wallets are vulnerable.
The collapse of Binance’s rival FTX in November last year prompted fears about crypto exchanges’ ability to keep users’ assets safe, with regulators probing FTX over the misuse of customer funds.
“This an exercise to build trust among institutions that their funds will remain safe. Its a positive development that shows Binance is moving toward becoming an institutional-focused crypto exchange,” said Markus Thielen, head of research and strategy at crypto services provider Matrixport.
“However, this might not be enough as exchanges will likely have to work with external custodians to completely eliminate risks around collateral ownership,” Thielen said.
Binance did not immediately respond to CoinDesk’s request for further comment.
UPDATE (Jan. 16, 12:44 UTC): Adds additional detail and context throughout. Adds comment from Matrixport.
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