Binance appears to be yielding to the pressure from its users who desire to store their assets with independent custodians.
According to a Financial Times report on Tuesday, January 30, 2024, the crypto exchange will soon start allowing its users to store their assets in independent storage options.
The report noted that the exchange had begun exploring and building banking triparty solutions nearly two years ago, before the emergence of counterparty risk. This triparty solution reportedly connected the exchange, its clients, and an external bank custodian.
Before now, Binance only allowed its users to store their assets on its exchange platform or Ceffu custodian wallet—which the exchange claims is its only institutional custody partner. And it has been under pressure from its users to store their assets independently, like in traditional banks, such as the Swiss Flow Bank and Sygnum Bank.
One major reason for the increasing fears of clients to store their assets on an exchange is the 2022 crash of Binance’s main competitor, FTX. The outcome of the crash saw thousands of its user’s funds inaccessible, even during the firm’s bankruptcy proceedings.
Another key reason for customers’ growing fear is the protracted legal battle between the United States regulatory authorities and Binance regarding the operation of its subsidiaries within the country.
In November 2023, the United States Treasury and Department of Justice (DOJ) charged the exchange with multiple violations of federal regulations, including money laundering practices and unlicensed money transmitter operations. This resulted in the exchange agreeing to pay a historic fine of about $4.3 billion and its co-founder, Changpeng Zhao, stepping down from his role as CEO.
Binance is currently battling the U.S. Securities and Exchange Commission (SEC) in court over 13 different charges, including breaching securities law. The agency also accused the exchange of being involved in a “broad web of deception and conflicts of interest.” Though the exchange has refuted the accusations, the issue has yet to be resolved.
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